We tested the hypothesis that overstorey of eucalypt forest dominated by tall, large diameter trees uses less water than regrowth stands in the high rainfall zone (>1100 mm year −1 ) of the northern jarrah ( Eucalyptus marginata ) forest in southwestern Australia. We measured leaf area, cover, sapwood area and sapwood density at three paired old and regrowth stands. We also measured sapflow velocity at one paired stand (Dwellingup) from June 2007 to October 2008. Old stands had more basal area but less foliage cover, less leaf area and slightly thinner sapwood. The ratio of sapwood area to basal area decreased markedly as tree size increased. Sapwood area of the regrowth forest stands (6.6 ± 0.30 m 2 ha −1 ) was nearly double that of the old stands (3.4 ± 0.17 m 2 ha −1 ), despite larger basal area at the old stands. Leaf area index of the regrowth stands (2.1 ± 0.26) was only one-third larger than that at the old stands (1.5 ± 0.15); hence, the ratio of leaf area to sapwood area was larger in old stands than in regrowth stands (0.45 ± 0.022 m 2 cm −2 versus 0.32 ± 0.045 m 2 cm −2 ). Our results are consistent with theories that trees have evolved to optimize carbon gain rather than maintain stomatal conductance. Neither sapwood density (540–650 kg m −3 ) nor sap velocity differed greatly between regrowth and old stands. At the old forest site, daily transpiration rose from 0.5 mm day −1 in winter to 0.9 mm day −1 in spring–summer, compared to 0.9 mm day −1 and 1.8 mm day −1 at the regrowth site. Annual water use by the overstorey trees was estimated to be ∼230 mm year −1 for the old stand and ∼500 mm year −1 at the regrowth stand, or 20% and 44% of annual rainfall. The overwhelming role of stand sapwood area in determining stand water use, combined with the marked changes in the ratio of sapwood area to basal area with tree age and size, suggest that stand overstorey structure can be managed to alter overstorey water use and catchment water yield. Silviculture to promote old-forest-like attributes may be a viable means of delivering multiple water and conservation benefits.