Water resources and their management present social, economic and environmental challenges, with demand for human consumptive, industrial and environmental uses increasing globally. However, environmental water requirements, that is, the allocation of water to the maintenance of ecosystem health, are often neglected or poorly quantified. Further, transpiration by trees is commonly a major determinant of the hydrological balance of woodlands but recognition of the role of groundwater in hydrological balances of woodlands remains inadequate, particularly in mesic climates. In this study, we measured rates of tree water-use and sapwood 13C isotopic ratio in a mesic, temperate Eucalypt woodland along a naturally occurring gradient of depth-to-groundwater (DGW), to examine daily, seasonal and annual patterns of transpiration. We found that: (i) the maximum rate of stand transpiration was observed at the second shallowest site (4.3 m) rather than the shallowest (2.4 m); (ii) as DGW increased from 4.3 to 37.5 m, stand transpiration declined; (iii) the smallest rate of stand transpiration was observed at the deepest (37.5 m) site; (iv) intrinsic water-use efficiency was smallest at the two intermediate DGW sites as reflected in the Δ13C of the most recently formed sapwood and largest at the deepest and shallowest DGW sites, reflecting the imposition of flooding at the shallowest site and the inaccessibility of groundwater at the deepest site; and (v) there was no evidence of convergence in rates of water-use for co-occurring species at any site. We conclude that even in mesic environments groundwater can be utilized by trees. We further conclude that these forests are facultatively groundwater-dependent when groundwater depth is <9 m and suggest that during drier-than-average years the contribution of groundwater to stand transpiration is likely to increase significantly at the three shallowest DGW sites.