Abstract Over their lifetime, trees are repeatedly exposed to droughts. It is therefore important to understand whether repeated drought exposure makes trees more or less drought tolerant. Here, we investigated the effect of repeated droughts on functional trait expression and tree function in Eucalyptus obliqua. Further, we tested whether previous drought exposure enabled trees to avoid leaf death for longer under a subsequent severe drought. Trees were subjected for 1 year to 2 drought–rewatering cycles (drought treatment) or well-watered conditions, before imposing a severe drought. Trees in the drought treatment reduced their overall leaf area and biomass, whereas leaf-level anatomical, morphological and physiological traits remained mostly unaffected. There were no differences in water potential at the turgor loss point, leaf xylem vulnerability to embolism, leaf size, maximum xylem vessel diameter or cell wall thickness between treatments after the conditioning period. When exposed to a subsequent severe drought, trees previously exposed to drought were more drought tolerant due to a lower water potential at leaf death and tree-level morphological rather than physiological adjustments. Trees previously exposed to drought were smaller and used less water, which delayed leaf death for 39 days compared with 22 days for the well-watered trees. Our study indicates that previous drought exposure can facilitate tree-level morphological adjustment, which potentially enhances survival of E. obliqua trees during subsequent drought events.