Species, particularly foliovores, at the trailing edge of their geographical range are likely to be most vulnerable to climate change as they respond to physiological stress and the decline in the nutrient richness of their food source. We investigate the effect of environmental conditions on diet composition, resource use, and physiological stress of koalas (Phascolarctos cinereus) in the semi-arid landscapes of southwest Queensland, Australia, across three different biogeographic regions. Fresh faecal pellets were collected to measure cortisol metabolites and assess diet. Regression analyses were used to relate the diet composition and physiological stress of wild koalas to environmental variables. The impact of drought was apparent, with higher faecal cortisol metabolites (FCM) levels recorded during drought conditions compared with post-flood conditions. Diet composition also changed between drought and post-flood conditions, with diets during drought being mainly composed of species with high leaf-moisture content. Low minimum temperatures increased FCM concentrations, and these effects were greater during drought conditions. The results demonstrate the importance of integrating physiological assessments into ecological studies to identify stressors that have the potential to compromise the long-term survival of threatened species, as well as the need to identify the resources required for their continued survival.