Tree intrinsic water-use efficiency (iWUE) has dramatically increased in recent decades in global forests. The rising iWUE can be a result of either enhanced photosynthesis rate (A), or decreased stomatal conductance (g_s) or both. The underlying physiological mechanisms are still not well understood. Here, we investigated tree-ring isotopes δ¹³C and δ¹⁸O from two tree species in three altitudinal transects on the southeast Tibetan plateau. We found that the relationship between iWUE and ∆¹⁸O_lw was negative at lower-altitude forests, whereas it was positive at the treeline, indicating that enhanced photosynthesis was the main driver of the increasing iWUE at the treeline, whereas reduction in stomatal conductance was the prime regulator at lower-altitude forests. Furthermore, vapor pressure deficit (VPD) and precipitation during the main growing season showed the highest and significant correlations with leaf water ¹⁸O (Δ¹⁸O_lw) at lower-altitude forests, suggesting that g_s was strongly controlled by moisture conditions in the growing season particularly in the lower-altitude forests. These findings shed light to a better understanding of the regulatory mechanism of iWUE changes under the background of rising atmospheric CO₂ and climate change and serve to improve the reliability of ecophysiological modeling.