Drought is the main limiting factor of forage production in semi-arid areas. Annual variation of soil water availability (SWA), predawn leaf water potential (Ψ pd ), stomatal conductance (g), photosynthesis rate (A) and the intrinsic water use efficiency (A/g) were examined under irrigation (control) and rain fed conditions in Palma de Mallorca (Spain) for two Mediterranean shrubs: Medicago arborea (M. arborea), with a wide distribution and Medicago citrina (M. citrina), an endemic species to the Balearic islands. Experimental conditions were typically Mediterranean, with low annual precipitation.In well-irrigated plants, SWA and Ψ pd were similar for both species throughout the year but higher g was observed in autumn and in spring-summer. The photosynthesis rate was slightly higher in autumn and spring. Even though photosynthetic activity in M. arborea was higher than in M. citrina in spring, A/g was relatively higher for M. citrina for most of the year due to a lower transpiration rate.Under rain fed conditions, SWA dropped after February from 70% to 10-20%. Variations in plant water status, g and A were mainly dependent on SWA. Moreover, differences for water extraction and water use efficiency between species were found. Under moderate drought (SWA > 60%), g was more severely reduced than A and Ψ pd (October-March), as a consequence, A/g increased. Stomatal conductance variations for both species were more closely related to soil moisture rather than to leaf water status. Interestingly, M. citrina desiccated the soil more gradually and extracted water at deeper horizons (between 0.5 and 1 m). As a consequence, it maintained relatively higher Ψ pd , g and A than M. arborea throughout spring. For M. arborea, SWA declined more rapidly and leaf shedding in spring was much more substantial. When subjected to severe and prolonged summer drought (SWA < 50%), all parameters were severely reduced for both species and A had values near zero. Consequently, A/g was low and the senescence of the majority of leaves for M. arborea took place. On the basis of these results, M. citrina exhibits a higher water use efficiency under moderate drought.