Pathogens can cause chronic premature needle abscission in coniferous species. To assess the potential impacts on tree productivity, stomatal regulation was investigated in Douglas fir with chronic stomatal occlusion and defoliation from varying levels of the Swiss needle cast (SNC) fungus, Phaeocryptopus gaeumannii. Levels of SNC disease and subsequent defoliation were manipulated by choosing six sites with varying levels of disease and by foliar applications of fungicides on six trees per site. Diurnal measurements of leaf water potential (Ψleaf), stomatal conductance (gs) and vapor pressure deficit (D) were made on six fungicide treated and six control trees per site. In addition, leaf specific hydraulic conductance was calculated on a single branch (KL_B) from three trees per treatment per site. Stomatal conductance at D=1 kPa (gsref) was negatively correlated with fungal colonization (number of fruiting bodies present in needle stomata) and positively correlated with KL_B. Despite reduced needle retention in diseased trees, KL declined due to a reduction in sapwood area and permeability (i.e., increasing presence of latewood in functional sapwood). In general, stomatal sensitivity to D for all foliage was consistent with stomatal regulation based on a simple hydraulic model [gs=KL(Ψsoil−Ψleaf)/ D], which assumes strict stomatal regulation of Ψleaf. However, when fungal presence reduced maximum gs below the potential maximum supported by hydraulic architecture, stomatal sensitivity was lower than expected based on the theoretical relationship: dgs/dlnD=0.6·gsref. The results indicate that losses in productivity associated with physical blockage of stomata and defoliation are compounded by additional losses in KL and a reduction in gs in remaining functional stomata.