Predicted decreases in water availability across the temperate forest biome have the potential to offset gains in carbon (C) uptake from phenology trends, rising atmospheric CO2 , and nitrogen deposition. While it is well-established that severe droughts reduce the C sink of forests by inducing tree mortality, the impacts of mild but chronic water stress on forest phenology and physiology are largely unknown. We quantified the C consequences of chronic water stress using a 13-year record of tree growth (n = 200 trees), soil moisture, and ecosystem C balance at the Morgan-Monroe State Forest (MMSF) in Indiana, and a regional 11-year record of tree growth (n >300,000 trees) and water availability for the 20 most dominant deciduous broadleaf tree species across the Eastern and Midwestern USA. We show that despite ~26 more days of C assimilation by trees at the MMSF, increasing water stress decreased the number of days of wood production by ~42 days over the same period, reducing the annual accrual of C in woody biomass by 41%. Across the deciduous forest region, water stress induced similar declines in tree growth, particularly for water-demanding "mesophytic" tree species. Given the current replacement of water-stress adapted "xerophytic" tree species by mesophytic tree species, we estimate that chronic water stress has the potential to decrease the C sink of deciduous forests by up to 17% (0.04 Pg C yr(-1) ) in the coming decades. This reduction in the C sink due to mesophication and chronic water stress is equivalent to an additional 1 to 3 days of global C emissions from fossil fuel burning each year. Collectively, our results indicate that regional declines in water availability may offset the growth-enhancing effects of other global changes and reduce the extent to which forests ameliorate climate warming. This article is protected by copyright. All rights reserved.