The water relations of two tree species in the Euphorbiaceae werecompared to test in part a hypothesis that the forest understorey plays anintegral role in drought response. At Danum, Sabah, the relatively commonspecies Dimorphocalyx muricatus is associated with ridgeswhilst another species, Mallotus wrayi, occurs widely bothon ridges and lower slopes. Sets of subplots within two 4 -hapermanent plots in this lowland dipterocarp rain forest, were positioned onridges and lower slopes. Soil water potentials were recorded in1995–1997,and leaf water potentials were measured on six occasions. Soil water potentialson the ridges (−0.047 MPa) were significantly lower than onthe lower slopes (−0.012 MPa), but during the driest periodin May 1997 they fell to similarly low levels on both sites (−0.53MPa). A weighted 40-day accumulated rainfall index was developedtomodel the soil water potentials. At dry times, D.muricatus(ridge) had significantly higher pre-dawn (−0.21 v.−0.57 MPa) and mid-day (−0.59 v.−1.77 MPa) leaf water potentials than M.wrayi (mean of ridge and lower slope). Leaf osmotic potentials ofM. wrayi on the ridges were lower (−1.63MPa) than on lower slopes (−1.09 MPa), withthose for D. muricatus being intermediate (−1.29MPa): both species adjusted osmotically between wet and dry times.D. muricatus trees were more deeply rooted thanM. wrayi trees (97 v. 70cm). M. wrayi trees had greaterlateral root cross-sectional areas than D. muricatus treesalthough a greater proportion of this sectional area for D.muricatus was further down the soil profile. D.muricatus appeared to maintain relatively high water potentialsduring dry periods because of its access to deeper water supplies and thus itlargely avoided drought effects, but M. wrayi seemed to bemore affected yet tolerant of drought and was more plastic in its response. Theinteraction between water availability and topography determines these species'distributions and provides insights into how rain forests can withstandoccasional strong droughts.