Water use efficiency (WUE) is a critical indicator for investigating carbon-water cycles and their coupling relationships in terrestrial vegetation ecosystems. Its dynamic variations directly influence the global carbon sink function and sustainable utilization of water resources. Carbon dioxide (CO₂) and water are fundamental materials supporting plant life, significantly influencing WUE by regulating physiological processes such as photosynthesis, respiration, and transpiration. Under ongoing global climate change, increases in atmospheric CO₂ concentrations and alterations in regional precipitation patterns have become increasingly pronounced. These changes profoundly impact plant growth, productivity, physiological functioning, and WUE, thus reshaping the terrestrial carbon-water balance. This article systematically summarizes current knowledge regarding the mechanisms, processes, and response patterns by which habitat CO₂ concentration and water availability influence plant WUE, integrating recent research findings to provide comprehensive insight. The study results suggest that the effects of CO₂ concentration and water conditions on plant WUE exhibited nonlinear characteristics. In the short term, increased CO₂ concentration enhances carbon assimilation efficiency by activating Rubisco carboxylase activity, thus increasing the photosynthetic rate. Concurrently, elevated CO₂ induces stomatal changes that reduce stomatal conductance, thereby synergistically decreasing plant transpiration and water loss, significantly increasing WUE. However, long-term elevated CO₂ concentration leads to photosynthetic adaptation in plants, weakening the positive effects of photosynthetic physiological processes on WUE. Water, on the other hand, influences stomatal behavior and plant morphology through gradient response mechanisms, consequently affecting WUE. Moderate drought stimulates stomatal optimization strategies, leading to decreased leaf stomatal conductance and increased WUE when the transpiration rate decreases more sharply than photosynthetic inhibition. Severe drought, however, significantly reduces WUE due to non-stomatal limitations, indirectly constraining WUE by inhibiting root water absorption efficiency under conditions of water surplus. Additionally, complex interactions exist between habitat CO₂ concentrations and water conditions. Elevated CO₂ concentrations can partially alleviate the adverse effects of drought stress by enhancing plant physiological resilience and water-saving strategies, thereby sustaining higher WUE under limited water supply conditions. Nonetheless, these interactive effects vary considerably according to plant photosynthetic types, duration of stress exposure, and ecological context. Crassulacean acid metabolism (CAM) plants consistently exhibit higher WUE than C3 and C4 species, while C4 plants generally display higher WUE compared to C3 plants due to inherent physiological and biochemical differences. Furthermore, plant responses to changing CO₂ concentrations and water availability show marked multi-scale differentiation. The response patterns differ notably across scales ranging from leaf level, individual plant level, community structure, to broader ecosystem functioning.