Taking advantage of novel IoT technologies, a new multifunctional device, the “TreeTalker”, was developed to monitor real-time ecophysical and biological parameters of individual trees, as well as climatic variables related to their surrounding environment, principally, air temperature and air relative humidity. Here, IoT applied to plant ecophysiology and hydrology aims to unravel the vulnerability of trees to climatic stress via a single tree assessment at costs that enable massive deployment. We present the performance of the TreeTalker to elucidate the functional relation between the stem water content in trees and respective internal/external (stem hydraulic activity/abiotic) drivers. Continuous stem water content records are provided by an in-house-designed capacitance sensor, hosted in the reference probe of the TreeTalker sap flow measuring system, based on the transient thermal dissipation (TTD) method. In order to demonstrate the capability of the TreeTalker, a three-phase experimental process was performed including (1) sensor sensitivity analysis, (2) sensor calibration, and (3) long-term field data monitoring. A negative linear correlation was demonstrated under temperature sensitivity analysis, and for calibration, multiple linear regression was applied on harvested field samples, explaining the relationship between the sample volumetric water content and the sensor output signal. Furthermore, in a field scenario, TreeTalkers were mounted on adult Fagus sylvatica L. and Quercus petraea L. trees, from June 2020 to October 2021, in a beech-dominated forest near Marburg, Germany, where they continuously monitored sap flux density and stem volumetric water content (stem VWC). The results show that the range of stem VWC registered is highly influenced by the seasonal variability of climatic conditions. Depending on tree characteristics, edaphic and microclimatic conditions, variations in stem VWC and reactions to atmospheric events occurred. Low sapwood water storage occurs in response to drought, which illustrates the high dependency of trees on stem VWC under water stress. Consistent daily variations in stem VWC were also clearly detectable. Stem VWC constitutes a significant portion of daily transpiration (using TreeTalkers, up to 4% for the beech forest in our experimental site). The diurnal–nocturnal pattern of stem VWC and sap flow revealed an inverse relationship. Such a finding, still under investigation, may be explained by the importance of water recharge during the night, likely due to sapwood volume changes and lateral water distribution rather than by a vertical flow rate. Overall, TreeTalker demonstrated the potential of autonomous devices for monitoring sap density and relative stem VWC in the field of plant ecophysiology and hydrology.