Stem or trunk girdling is a technique used in physiological studies and in horticultural practice for interrupting carbon flow through the phloem to other parts of the plant without influencing water flow in the xylem. Trunk girdling in peaches is practiced primarily to stimulate fruit growth but it also tends to decrease shoot vigour for a period of time after girdling. Water flow through the trunk or branches of peach trees is thought to be primarily dependent on the most recently formed ring of xylem and vegetative growth is closely related to stem water potential and stem hydraulic conductance. The aim of the present work was to determine whether vigour reduction due to girdling was correlated with a reduction in midday stem water potential during the period of time between girdling and the subsequent healing of stem tissue. ‘Springcrest’ peach trees were girdled on two different dates. Fruit yield and size, water sprout growth, proleptic shoot growth and stem water potential were measured. Early and late girdled trees yielded larger fruits and fewer and shorter water sprouts in comparison with control trees. Midday stem water potential declined significantly after girdling and gradually recovered until the time of fruit harvest. These results suggest that the vigour reduction of girdled trees is related to a decrease of midday stem water potential caused by girdling. Early tree girdling increased the reduction in midday stem water potential and shoot growth compared with the later girdling treatment. These results point out that even though girdling only removes bark and phloem tissue it can apparently affect water flow in xylem.