The objective of this study was to evaluate the drought tolerance, compensatory growth, and different plant traits between two native perennial caespitose grasses and two native rhizomatous grasses in response to drought and defoliation. A randomized complete block design at the Swift Current Research and Development Centre (SCRDC) of Agriculture and Agri‐Food Canada (AAFC) examined the effects of water stress and clipping on the plant biomass, plant morphological traits, and relative leaf chlorophyll content (SPAD value) of four native grasses (caespitose grass: Hesperostipa comata and H. curtiseta; rhizomatous grass: Pascopyrum smithii and Elymus lanceolatus). Drought drastically decreased the shoot and root biomass, plant height, number of tillers and leaf growth of P. smithii and E. lanceolatus, as well as the rhizome biomass and R/S ratio of P. smithii. Defoliation had a positive effect on the shoot biomass of P. smithii and E. lanceolatus under well water treatments (100% and 85% of field capacity). However, the compensatory growth of P. smithii and E. lanceolatus significantly declined with increased water stress. In addition, there are no significant changes in plant biomass, plant height, number of tillers and leaves, and SPAD value of H. comata and H. curtiseta under relative dry condition (70% of field capacity). Consequently, these results demonstrated that the rhizomatous grasses possessed a stronger compensation in response to defoliation under wet conditions, but the positive effects of defoliation can be weakened by drought. The caespitose grasses (Hesperostipa species) exhibited a greater drought tolerance than rhizomatous grasses due to the relatively stable plant traits in response to water stress.