Water stress is considered one of the main environmental factors that limit survival and productivity of Eucalyptus plantations. Identifying genotypes traits that provide evidence of tolerance to water stress may allow sustained productivity and secure better resilience of forest plantations under climate change in Mediterranean environments. Our study analyzed morphological, physiological, and carbon (C) balance responses of ten Eucalyptus genotypes under contrasting water regimes under nursery conditions. One-year-old cuttings of Eucalyptus nitens (En1 and En2), E. smithii (Es), E. badjensis (Eb), E. nitens x globulus (Eng1, Eng2, Eng3, and Eng4), E. globulus (Eg), and E. camaldulensis x globulus (Ecg) were evaluated under progressive drought from well-watered (soil water potential close to 0 MPa) to severe water stress (soil water potential close to - 2.5 MPa) conditions. Absolute growth rate (root collar diameter, height, shoot: root biomass ratio), net photosynthesis, stomatal conductance, transpiration, intrinsic water use efficiency (iWUE), predawn water potential (Psi(pd)) and C balance (flux and partitioning) were evaluated. As expected, water stress significantly reduced growth and physiological activity for all genotypes. Of all evaluated parameters iWUE and Psi(pd) were the key grouping physiological and growth response variables among genotypes. Genotypes En1, Eng3, and Eng4 were considered tolerant genotypes, with the smallest physiological change and larger morphological growth. Genotypes En2, Es, Eng1 and Eng2 were moderately tolerant showing intermediate responses compared to other groups. In contrast, Eg, Eb, and Ecg were considered highly sensitive, with major changes in morphology and physiological variables over time. Our results suggest that nursery stage physiological evaluation of genotypes may allow selection for sites with water resource availability risks and may allow to reduce mortality and early establishment productivity losses under drier climate change scenarios.