During droughts, leaves are predicted to act as 'hydraulic fuses' by shedding when plants reach critically low water potential (Ψ ), thereby slowing water loss, stabilizing Ψ and protecting against cavitation-induced loss of stem hydraulic conductivity (K ). We tested these predictions among trees in seasonally dry tropical forests, where leaf shedding is common, yet variable, among species. We tracked leaf phenology, Ψ and K in saplings of six tree species distributed across two forests. Species differed in their timing and extent of leaf shedding, yet converged in shedding leaves as they approached the Ψ value associated with a 50% loss of K and at which their model-estimated maximum sustainable transpiration rate approached zero. However, after shedding all leaves, the Ψ value of one species, Genipa americana, continued to decline, indicating that water loss continued after leaf shedding. K was highly variable among saplings within species and seasons, suggesting a minimal influence of seasonal drought on K . Hydraulic limits appear to drive diverse patterns of leaf shedding among tropical trees, supporting the hydraulic fuse hypothesis. However, leaf shedding is not universally effective at stabilizing Ψ , suggesting that the main function of drought deciduousness may vary among species.