Eight perennial C-4 grasses from the Jornada del Muerto Basin in southern New Mexico show five-fold differences in relative growth rates under well- watered conditions (RGR). In a controlled environment, we tested the hypothesis that there is an inverse relationship (trade-off) between RGR and the capacity of these species to tolerate drought. We examined both physiological (gas exchange) and morphological (biomass allocation, leaf properties) determinants of growth for these eight species under three steady-state drought treatments (none=control, moderate, and severe). When well watered, the grasses exhibited a large interspecific variation in growth, which was reflected in order-of-magnitude biomass differences after 5 weeks. The species had similar gas-exchange characteristics, but differed in all the measured allocation and morphological characteristics, namely tiller mass and number, root:shoot ratio, dry-matter content, and specific leaf area (SLA). Drought affected tillering, morphology, and allocation, and reduced growth by 50 and 68% (moderate and severe drought, respectively) compared to the well-watered controls. With the exception of SLA, none of these variables showed a significant species-by-treatment interaction. We calculated three indices of drought tolerance, defined as the ratio in final biomass between all the possible "dry"/"wet" treatment pairs: severe/moderate, moderate/control, and severe/control. We found no significant correlation between these drought tolerance indices, on the one hand, and three indices of growth potential (greenhouse RGR, final biomass in the control treatment, and final:initial biomass ratio in controls), on the other. Based on these controlled-environment results, we hypothesize that the commonly reported correlation between plant growth potential and drought tolerance in the field may in some cases be explained by differential effects of plants on soil-water content rather than by differences in species responses to drought.