Water stress is a main growth-limiting factor for plants in arid and semi-arid regions. In this study, we evaluated the hydraulic architecture traits and physiological functions of three Caragana genus species (Caragana microphylla, Caragana intermedia, Caragana korshinskii) in different drought environments. The aim was to explore causes of ecological separation from ecological adaption strategies of three Caragana species. Field methods were used to survey morphological traits such as the first and secondary branch diameters and lengths. Measured hydraulic architecture traits included xylem conduit, leaf vein density, leaf thickness, and leaf mass area. The physiological functions included hydraulic conductance, photosynthesis, and water use efficiency. Our results showed that all three Caragana species had small conduit diameter structures to adapt to xeric environments, but also showed some differences in other hydraulic architecture traits. Conduit diameters of C. intermedia were smaller than those of the other species, whereas leaf minor vein density and maximum photosynthesis rates were the highest. Leaf thickness, leaf mass area, and conduits diameter of C. korshinskii were larger than those of the other species. Caragana microphylla showed the largest P₅₀, suggesting that embolism was easier under water stress and xylem embolism reduced water transportation efficiency to maintain the requirements for growth by reducing the water supply in an arid environment. Caragana intermedia had reduced xylem conduit diameters to adapt to drought conditions. Caragana korshinskii exhibited the strongest ability to resist embolism and drought tolerance and reduced the water supply by decreasing the transpiration area. Xylem conduit size, leaf thickness, leaf mass area, and leaf vein density have important effects on plant physiology, such as hydraulic conductance and photosynthetic rate.