Ponderosa pine (Pinus ponderosa Dougl. ex P. Laws) forest stand density has increased significantly over the last century (Covington et al. 1997). To understand the effect of increased intraspecific competition, tree size (height and diameter at breast height (DBH)) and leaf area to sapwood area ratio (A(L):A(S)) on water relations, we compared hydraulic conductance from soil to leaf (kl) and transpiration per unit leaf area (Q(L)) of ponderosa pine trees in an unthinned plot to trees in a thinned plot in the first and second years after thinning in a dense Arizona forest. We calculated kl and Q(L) based on whole- tree sap flux measured with heat dissipation sensors. Thinning increased tree predawn water potential within two weeks of treatment. Effects of thinning on kl and Q(L) depended on DBH, A(L):A(S) and drought severity. During severe drought in the first growing season after thinning, kl and Q(L) of trees with low A(L):A(S) (160-250 mm DBH; 9-11 m height) were lower in the thinned plot than the unthinned plot, suggesting a reduction in stomatal conductance (g(s)) or reduced sapwood specific conductivity (K(S)), or both, in response to thinning. In contrast kl and Q(L) were similar in the thinned plot and unthinned plot for trees with high A(L):A(S) (260-360 mm DBH; 13-16 m height). During non-drought periods, kl and Q(L) were greater in the thinned plot than in the unthinned plot for all but the largest trees. Contrary to previous studies of ponderosa pine, A(L):A(S) was positively correlated with tree height and DBH. Furthermore, kl and Q(L) showed a weak negative correlation with tree height and a strong negative correlation with A(S) and thus A(L):A(S) in both the thinned and unthinned plots, suggesting that trees with high A(L):A(S) had lower g(s). Our results highlight the important influence of stand competitive environment on tree-size-related variation in A(L):A(S) and the roles of A(L):A(S) and drought on whole-tree water relations in response to thinning.