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Abstract Southern California experienced unprecedented megadrought between 2012 and 2018. During this time,Malosma laurina, a chaparral species normally resilient to single‐year intense drought, developed extensive mortality exceeding 60% throughout low‐elevation coastal populations of the Santa Monica Mountains. We assessed the physiological mechanisms by which the advent of megadrought predisposedM. laurinato extensive shoot dieback and whole‐plant death. We found that hydraulic conductance of stem xylem (K_{s, native}) was reduced seven to 11‐fold in dieback adult and resprout branches, respectively. Staining of stem xylem vessels revealed that dieback plants experienced 68% solid‐blockage, explaining the reduction in water transport. Following Koch's postulates, persistent isolation of a microorganism in stem xylem of dieback plants but not healthy controls indicated that the causative agent of xylem blockage was an opportunistic endophytic fungus,Botryosphaeria dothidea. We inoculated healthyM. laurinasaplings with fungal isolates and compared hyphal elongation rates under well‐watered, water‐deficit, and carbon‐deficit treatments. Relative to controls, we found that both water deficit and carbon‐deficit increased hyphal extension rates and the incidence of shoot dieback.