AbstractIncreases in terrestrial water‐use efficiency (WUE) have been reported in many studies, pointing to potential changes in physiological forcing of global carbon and hydrological cycles. However, gains in WUE are of uncertain magnitude over longer (i.e. >10 years) periods of time largely owing to difficulties in accounting for structural and physiological acclimation. ¹³C signatures (i.e. δ¹³C) of plant organic matter have long been used to estimate WUE at temporal scales ranging from days to centuries. Mesophyll conductance is a key uncertainty in estimated WUE owing to its influence on diffusion of CO₂ to sites of carboxylation. Here we apply new knowledge of mesophyll conductance to 464 δ¹³C chronologies in tree‐rings of 143 species spanning global biomes. Adjusted for mesophyll conductance, gains in WUE during the 20th century (0.15 ppm year⁻¹) were considerably smaller than those estimated from conventional modelling (0.26 ppm year⁻¹). Across the globe, mean sensitivity of WUE to atmospheric CO₂ was 0.15 ppm ppm⁻¹. Ratios of internal‐to‐atmospheric CO₂ (on a mole fraction basis; c_i/c_a) in leaves were mostly constant over time but differed among biomes and plant taxa—highlighting the significance of both plant structure and physiology. Together with synchronized responses in stomatal and mesophyll conductance, our results suggest that ratios of chloroplastic‐to‐atmospheric CO₂ (c_c/c_a) are constrained over time. We conclude that forest WUE may have not increased as much as previously suggested and that projections of future climate forcing via CO₂ fertilization may need to be adjusted accordingly.