Summary: The leaf economics spectrum (LES) describes a suite of functional traits that consistently covary at large spatial and taxonomic scales. Despite its importance at these larger scales, few studies have examined the major drivers of intraspecific variation in the LES – phenotypic plasticity and standing genetic variation. Using experimental precipitation manipulations, we examined whether covariation among leaf economics traits and selection on leaf economics traits and trait combinations change as diverse genotypes of the widespread perennial grass Panicum virgatum are exposed to differences in precipitation. We also used RNA‐Seq to examine whether groups of co‐expressed genes that align with leaf economics traits function in processes hypothesized to underlie the LES. Water availability impacted leaf economics trait covariation in important ways – covariation between leaf economics traits and selection on covariation between traits (i.e. correlational selection) tended to be strongest when water availability was high. Additionally, many genes associated with leaf economics traits functioned in processes that may explain how the LES originates, such as chloroplasts, cell walls, and nitrogen metabolism. Water availability is likely an important modulator of selection and evolution of the LES in P. virgatum that can be better understood by examining gene expression.