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The study of functional traits and physiological mechanisms determining species' drought tolerance is important for the prediction of their responses to climatic change. Fog-dependent forest patches in semiarid regions are a good study system with which to gain an understanding of species' responses to increasing aridity and patch fragmentation. Here we measured leaf and hydraulic traits for three dominant species with contrasting distributions within patches in relict, fog-dependent forests in semiarid Chile. In addition, we assessed pressure-volume curve parameters in trees growing at a dry leeward edge and wet patch core. We predicted species would display contrasting suites of traits according to local water availability: from one end favoring water conservation and reducing cavitation risk, and from the opposite end favoring photosynthetic and hydraulic efficiency. Consistent with our hypothesis, we identified a continuum of water use strategies explaining species distribution along a small-scale moisture gradient. Drimys winteri, a tree restricted to the humid core, showed traits allowing efficient water transport and high carbon gain; in contrast, Myrceugenia correifolia, a tree that occurs in the drier patch edges, exhibited traits promoting water conservation and lower gas exchange rates, as well low water potential at turgor loss point. The most widespread species, Aextoxicon punctatum, showed intermediate trait values. Osmotic compensatory mechanism was detected in M. correifolia, but not in A. punctatum. We show that partitioning of the pronounced soil moisture gradients from patch cores to leeward edges among tree species is driven by differential drought tolerance. Such differences indicate that trees have contrasting abilities to cope with future reductions in soil moisture.