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Drought is a cyclical phenomenon in natural environments. During dehydration, stomatal closure is mainly regulated by abscisic acid (ABA) dynamics that limit transpiration in seed plants, but following rehydration, the mechanism of gas exchange recovery is still not clear. In this study, leaf water potential (ψleaf), stomatal conductance (gs), leaf hydraulic conductance (Kleaf), foliar ABA level, ethylene emission rate in response to dehydration and rehydration were investigated in four Caragana species with isohydric (Caragana spinosa and C. pruinosa) and anisohydric (C. intermedia and C. microphylla) traits. Two isohydric species with ABA‐induced stomatal closure exhibited more sensitive gs and Kleaf to decreasing ψleaf than two anisohydric species which exhibited a switch from ABA to water potential‐driven stomatal closure during dehydration. Following rehydration, the recovery of gas exchange was not associated with a decrease in ABA level but was strongly limited by the degradation of the ethylene emission rate in all species. Furthermore, two anisohydric species with low drought‐induced ethylene production exhibited more rapid recovery in gas exchange upon rehydration. Our results indicated that ethylene is a key factor regulating the drought‐recovery ability in terms of gas exchange, which may shape species adaptation to drought and potential species distribution. Drought is a cyclical phenomenon in natural environments. During dehydration, stomatal closure is mainly regulated by abscisic acid (ABA) dynamics that limit transpiration in seed plants, but the mechanisms of gas exchange recovery are still not clear following rehydration. The results in this study indicate that ethylene is a key factor regulating the drought‐recovery ability in terms of gas exchange, which may shape species adaptation to drought and potential species distribution. [ABSTRACT FROM AUTHOR]