Diel (24‐h) time courses of CO2 exchange, water relations, and microclimate of the foliose lichen, Sticta tomentosa (Swartz) Ach., and responses to experimentally manipulated conditions were measured at a forest edge in a lower montane rainforest in Panama.Similar to earlier observations on two other rain forest lichens, daily desiccation suppressed net photosynthesis (NP) during the period when irradiation was highest. Not surprisingly, the light response curves of NP showed saturation at rather low light levels. Rehydration was associated with an initial resaturation burst of short duration, which could be demonstrated both under natural conditions and experimentally. This additional loss of CO2 seems too low to be ecologically relevant. Moreover, high thallus hydration was also detrimental to NP: at maximum water content net CO2 uptake was depressed by >50%. Although NP was well adapted to the prevailing high temperatures, the latter also stimulated dark respiration. On average, almost 60% of the diurnal carbon gain was lost during the night.In spite of these limitations, the integrated 24‐h C gain was quite high, on average 0·5% of the thallus C content. Whilst these figures were determined for horizontally exposed samples, we also assessed the role of different exposures on photosynthetic performance. Diel C gain was highest under conditions of semi‐shade (westerly exposure), which allowed long periods of activity, whilst much higher irradiance at other exposures could not be utilized for photosynthetic production: easterly exposed thalli dried out even faster than horizontally exposed samples.