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Abstract Forest canopy water use and carbon cycling traits (WCT) can vary substantially and in spatially organized patterns, with significant impacts on watershed ecohydrology. In many watersheds, WCT may vary systematically along and between hydrologic flowpaths as an adaptation to available soil water, nutrients, and microclimate‐mediated atmospheric water demand. We hypothesize that the emerging patterns of WCT at the hillslope to catchment scale provide a more resistant ecohydrological system, particularly with respect to drought stress, and the maintenance of high levels of productivity. Rather than attempting to address this hypothesis with species‐specific patterns, we outline broader functional WCT groups and explore the sensitivity of water and carbon balances to the representation of canopy WCT functional organization through a modelling approach. We use a well‐studied experimental watershed in North Carolina where detailed mapping of forest community patterns are sufficient to describe WCT functional organization. Ecohydrological models typically use broad‐scale characterizations of forest canopy composition based on remotely sensed information (e.g., evergreen vs. deciduous), which may not adequately represent the range or spatial pattern of functional group WCT at hillslope to watershed scales. We use three different representations of WCT functional organizations: (1) restricting WCT to deciduous/conifer differentiation, (2) utilizing more detailed, but aspatial, information on local forest community composition, and (3) spatially distributed representation of local forest WCT. Accounting for WCT functional organization information improves model performance not only in terms of capturing observed flow regimes (especially watershed‐scale seasonal flow dynamics) but also in terms of representing more detailed canopy ecohydrologic behaviour (e.g., root zone soil moisture, evapotranspiration, and net canopy photosynthesis), especially under dry condition. Results suggest that the well‐known zonation of forest communities over hydrologic gradients is not just a local adaptation but also provides a property that regulates hillslope to catchment‐scale behaviour of water use and drought resistance.