Phylogenetic analyses show that C₄ grasses typically occupy drier habitats than their C₃ relatives, but recent experiments comparing the physiology of closely related C₃ and C₄ species have shown that advantages of C₄ photosynthesis can be lost under drought. We tested the generality of these paradoxical findings in grass species representing the known evolutionary diversity of C₄ NADP-me and C₃ photosynthetic types. Our experiment investigated the effects of drought on leaf photosynthesis, water potential, nitrogen, chlorophyll content and mortality. C₄ grasses in control treatments were characterized by higher CO₂ assimilation rates and water potential, but lower stomatal conductance and nitrogen content. Under drought, stomatal conductance declined more dramatically in C₃ than C₄ species, and photosynthetic water-use and nitrogen-use efficiency advantages held by C₄ species under control conditions were each diminished by 40%. Leaf mortality was slightly higher in C₄ than C₃ grasses, but leaf condition under drought otherwise showed no dependence on photosynthetic-type. This phylogenetically controlled experiment suggested that a drought-induced reduction in the photosynthetic performance advantages of C₄ NADP-me relative to C₃ grasses is a general phenomenon.