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Droughts of increasing severity and frequency are a primary cause of forest mortality associated with climate change. Yet, fundamental knowledge gaps regarding the complex physiology of trees limit the development of more effective management strategies to mitigate drought effects on forests. Here, we highlight some of the basic research needed to better understand tree drought physiology and how new technologies and interdisciplinary approaches can be used to address them. Our discussion focuses on how trees change wood development to mitigate water stress, hormonal responses to drought, genetic variation underlying adaptive drought phenotypes, how trees ‘remember’ prior stress exposure, and how symbiotic soil microbes affect drought response. Next, we identify opportunities for using research findings to enhance or develop new strategies for managing drought effects on forests, ranging from matching genotypes to environments, to enhancing seedling resilience through nursery treatments, to landscape‐scale monitoring and predictions. We conclude with a discussion of the need for co‐producing research with land managers and extending research to forests in critical ecological regions beyond the temperate zone.