Concerns over energy security and environmental sustainability have stimulated interest in development of high-yield, low-lignin trees for bioenergy. Black cottonwood (Populus trichocdtpa) has been targeted as a potential bioenergy species due to its high productivity, but it is unclear how transgenically altered lignin biosynthesis will affect plant function. We investigated the physiology of two transgenic P. trichocarpa genotypes grown in short rotation woody cropping systems at two sites in southeastern USA: (1) mesic mountain site and (2) warmer, drier Piedmont site. Our results suggest that lignin is fundamental for tree growth and survival in field environments. Lignin deficiency can decrease biochemical photosynthetic processes and interfere with the temperature-response of photosynthesis. Significantly, hydraulic conductivity of transgenic genotypes was 15-25% that of wildtype trees, resulting in decreased leaf-specific whole-plant hydraulic conductance. In the Piedmont, decreased hydraulic efficiency drastically reduced productivity of low-lignin genotypes by 50-70% relative to wildtype. Transgenic trees at the mountain site recovered stem lignin concentrations to levels observed in wildtype trees, but still had severely impaired hydraulic traits, highlighting the major consequences of genetic transformation on whole-plant function. Surprisingly, substantial loss of hydraulic conductivity had only minor effects on productivity at the mesic site and resulted in an alternative advantage for bioenergy systems lower water consumption. In the hottest month (July), higher intrinsic water use efficiency resulted in total water savings of roughly 1 kg d(-1) per transgenic tree without sacrificing productivity. Decreased hydraulic conductivity could therefore be a promising trait for selection of water-efficient genotypes in Populus. (C) 2017 Elsevier Ltd. All rights reserved.