Height limitation in trees has been attributed in part to reductions in leaf photosynthesis that arise as gravity and path length cause lower water potentials in taller trees, necessitating greater stomatal regulation of transpiration and limitation of photosynthesis to maintain leaf turgor and/or avoid xylem cavitation as height increases. To test this idea, we compared diurnal patterns of in situ water potential and leaf conductance in Eucalyptus regnans trees of 60 and 90 meters height during the dry season at Kinglake National Park in Victoria, Australia. Predawn leaf water potentials were slightly (0.23MPa) and significantly lower in taller trees. Mean minimum daily water potential varied among days because of differences in daily temperature and VPD, but did not differ between height classes (p = 0.73) and was strongly correlated among taller and shorter trees (r^2 = 0.82, p = 0.03), indicating a similar environmental forcing for trees of different heights. In contrast to water potential, leaf conductance differed markedly between trees of different heights; maximum daily leaf conductance averaged 35% higher in leaves in the upper crown of 60 m trees (174 ± 21 mmol m^-2 s^-1) than 90 m trees (129 ± 22 mmol m^-2 s^-1), and daily integrated conductance was up to 100% higher in the shorter trees. Our results provide clear support for the hypothesis that reduced leaf-level photosynthesis contributes to a slowing of growth as trees increase in height.