Diurnal and seasonal fluctuations in the photosynthetic performance and water relations of two co-occurring Mediterranean shrubs, Erica multiflora and Globularia alypum were monitored throughout two consecutive years at Garraf Natural Park in north-east Spain. Leaf gas exchange rates, chlorophyll fluorescence and shoot water potentials were measured once each season. Leaf nitrogen and carbon concentrations, leaf δ13C and δ15N and specific leaf area (SLA) were also measured once a year (August) on well developed mature leaves. Globularia alypum experienced seasonal fluctuations in their water potential, with the lowest values recorded in summer, whereas E. multiflora did not show significant differences in water potential among seasons. Moreover, lower water potentials were found in G. alypum than in E. multiflora throughout the entire study, suggesting that the latter behaved as a drought-avoiding species, whereas the former tolerated lower water potentials. In both species, maximum leaf gas exchange rates were observed in autumn and secondarily in spring; in contrast, photosynthetic and transpiration rates reached absolute minima in summer. The stronger fluctuations in water potential and leaf gas exchange rates found in G. alypum compared to E. multiflora, suggest that G. alypum is, sensu Levitt (1980), a water spender, whereas E. multiflora is a water conservative. This hypothesis is further supported by a higher integrated water-use efficiency (higher δ13C values) and a higher degree of sclerophylly (lower SLA) in E. multiflora in comparison with G. alypum. Globularia alypum showed higher leaf gas exchange rates and higher predawn potential photochemical efficiency (Fv/Fm) than E. multiflora during most of the study. In spring and autumn, predawn Fv/Fm values were within the optimal range, whereas chronic photoinhibition in summer and winter was detected in both species. However, whereas both species could maintain positive photosynthetic rates in winter, frequent negative values were found in summer, suggesting higher levels of stress during the drought period. These results together with the high correlations that were found between the net photosynthetic rates and several parameters of water availability (accumulated rainfall, soil moisture or midday water potential) provided further evidence of the key role of water availability in the regulation of the photosynthetic rates in these Mediterranean species. Warmer and drier conditions in future decades, as a consequence of climate change, may alter the present, slight competitive advantage of G. alypum and the fitness of both shrub species within semi-arid Mediterranean environments.