Mixed-species forests are, for multiple reasons, promising options for forest management in Central Europe. However, the extent to which interspecific competition affects tree hydrological processes is not clear. High-resolution dendrometers capture sub-daily variations in stem diameter; they can simultaneously monitor stem growth (irreversible changes in diameter) and water status (reversible changes) of individual trees. Using the information on water status, we aimed to assess potential effects of tree species mixture, expressed as local neighborhood identity, on night-time rehydration and water stress. We deployed 112 sensors in pure and mixed forest stands of European beech, Norway spruce, and Douglas fir on four sites in north-western Germany, measuring stem diameter in 10-minute intervals for a period of four years (2019-2022). In a mixture distribution model, we used environmental variables, namely soil matric potential, atmospheric vapor pressure deficit, temperature, precipitation, and neighborhood identity to explain night-time rehydration, measured as the daily minimum tree water deficit (TWDmin). TWDmin was used as a daily indicator of water stress and the daily occurrence of sufficient water supply, allowing for stem growth (potential growth). We found that species and neighborhood identity affected night-time rehydration, but the impacts varied depending on soil water availability. While there was no effect at high water availability, increasing drought revealed species-specific patterns. Beech improved night-time rehydration in mixture with Douglas fir, but not in mixture with spruce. Douglas fir however, only improved rehydration at a smaller share of beech in the neighborhood, while beech dominance tended to reverse this effect. Spruce was adversely affected when mixed with beech. At species level and under dry conditions, we found that night-time rehydration was reduced in all species, but beech had a greater capacity to rehydrate under high to moderate soil water availability than the conifers, even under high atmospheric water demand. Our study gives new insights into neighborhood effects on tree water status and highlights the importance of species-specific characteristics for tree-water relations in mixed-species forests. It shows that drought stress of European beech can be reduced by admixing Douglas fir, which may point towards a strategy to adapt beech stands to climate change.