We investigated the water use of Caatinga vegetation, the largest seasonally dry forest in South America. We identified and analysed the environmental phenological drivers in woody species and their relationship with transpiration. To monitor the phenological evolution, we used remote sensing indices at different spatial and temporal scales: normalized difference vegetation index (NDVI), soil adjusted vegetation index (SAVI), and green chromatic coordinate (GCC). To represent the phenology, we used the GCC extracted from in-situ automated digital camera images; indices calculated based on sensors included NDVI, SAVI and GCC from Sentinel-2A and B satellites images, and NDVI products MYD13Q1 and MOD13Q1 from a moderate-resolution imaging spectroradiometer (MODIS). Environmental drivers included continuously monitored rainfall, air temperature, soil moisture, net radiation, and vapour pressure deficit. To monitor soil water status and vegetation water use, we installed soil moisture sensors along three soil profiles and sap flow sensors for five plant species. Our study demonstrated that the near-surface GCC data played an important role in permitting individual monitoring of species, whereas the species’ sap flow data correlated better with NDVI, SAVI, and GCC than with species’ near-surface GCC. The wood density appeared to affect the transpiration cessation times in the dry season, given that species with the lowest wood density reach negligible values of transpiration earlier in the season than those with high woody density. Our results show that soil water availability was the main limiting factor for transpiration during more than 80% of the year, and that both the phenological response and water use are directly related to water availability when relative saturation of the soil profile fell below 0.25.