Phloem failure has recently been recognized as one of the mechanisms causing tree mortality under drought, though direct evidence is still lacking. We combined 13C pulse-labelling of 8-year-old beech trees (Fagus sylvatica L.) growing outdoors in a nursery with an anatomical study of the phloem tissue in their stems to examine how drought alters carbon transport and phloem transport capacity. For the six trees under drought, predawn leaf water potential ranged from -0.7 to -2.4 MPa, compared with an average of -0.2 MPa in five control trees with no water stress. We also observed a longer residence time of excess 13C in the foliage and the phloem sap in trees under drought compared with controls. Compared with controls, excess 13C in trunk respiration peaked later in trees under moderate drought conditions and showed no decline even after 4 days under more severe drought conditions. We estimated higher phloem sap viscosity in trees under drought. We also observed much smaller sieve-tube radii in all drought-stressed trees, which led to lower sieve-tube conductivity and lower phloem conductance in the tree stem. We concluded that prolonged drought affected phloem transport capacity through a change in anatomy and that the slowdown of phloem transport under drought likely resulted from a reduced driving force due to lower hydrostatic pressure between the source and sink organs.