Using five eddy covariance flux sites (two forests and three grasslands), we investigated ecosystem physiological responses to the 2018 drought across elevational gradients in Switzerland. Flux measurements showed that at lower elevation sites (below 1000 m.a.s.l.; grassland and mixed forest) annual ecosystem productivity (GPP) declined by approximately 20% compared to the previous 2 years (2016 and 2017), which led to a reduced annual net ecosystem productivity (NEP). At the high elevation sites, however, GPP increased by approximately 14% and as a result NEP increased in the alpine and montane grasslands, but not in the subalpine coniferous forest. There, increased ecosystem respiration led to a reduced annual NEP, despite increased GPP and lengthening of the growing period. Among all ecosystems, the coniferous forest showed the most pronounced negative stomatal response to atmospheric dryness (i.e. vapour pressure deficit, VPD) that resulted in a decline in surface conductance and an increased water-use efficiency during drought. While increased temperature enhanced the water-use efficiency of both forests, de-coupling of GPP from evapotranspiration at the low-elevation grassland site negatively affected water-use efficiency due to non-stomatal reductions in photosynthesis. Our results show that hot droughts (such as in 2018) lead to different responses across plants types, and thus ecosystems. Particularly grasslands at lower elevations are the most vulnerable ecosystems to negative impacts of future drought in Switzerland. This article is part of the theme issue ‘Impacts of the 2018 severe drought and heatwave in Europe: from site to continental scale’.