AbstractVegetation structure and function are key design choices in terrestrial models that affect the relationship between carbon uptake and environmental drivers. Here, we investigate how representing canopy vertical structure in a terrestrial biosphere model—that is, micrometeorological, leaf area, and leaf water profiles—influences carbon uptake at five U.S. temperate deciduous forest sites in July. Specifically, we test whether the interannual variability (IAV) of gross primary productivity (GPP) responds differently to four abiotic environmental drivers—air temperature, relative humidity, incoming shortwave radiation, and soil moisture—using either a Community Land Model multilayer canopy model (CLM‐ml) or a big‐leaf model (CLM4.5/CLM5). We conclude that vertical leaf area and microclimatic profiles (temperature, humidity, and wind) do not impact GPP IAV compared to a single‐layer model when plant hydraulics is excluded. However, with a mechanistic representation of plant hydraulics there is vertically varying water stress in CLM‐ml, and the sensitivity of carbon uptake to particular climate variables changes with height, resulting in dampened canopy‐scale GPP IAV relative to CLM4.5. Dampening is due to both a reduced dependence on soil moisture and opposing climatic forcing on different leaf layers. Such dampening is not evident in the single‐layer representation of plant hydraulic water stress implemented in the recently released CLM5. Overall, both model representations of the canopy fail to accurately simulate observed GPP IAV and this may be related by their inability to capture the upper range of observed hourly GPP and diffuse light‐GPP relationships that cannot be resolved by canopy structure alone.