Grassland communities of arid western North America are often characterized by a seasonal increase in ambient temperature and evaporative demand and a corresponding decline in soil moisture availability. As the environment changes, particular species could respond differently, which should be reflected in a number of physiological processes. Carbon isotope discrimination varies during photosynthetic activity as a function of both stomatal aperture and the biochemistry of the fixation process, and provides an integrated measure of plant response to seasonal changes in the environment. We measured the seasonal course of carbon isotope discrimination in 42 grassland species to evaluate changes in gas exchange processes in response to these varying environmental factors. The seasonal courses were then used to identify community-wide patterns associated with life form, with phenology and with differences between grasses and forbs. Significant differences were detected in the following comparisons: (1) Carbon isotope discrimination decreased throughout the growing season; (2) perennial species discriminated less than annual species; (3) grasses discriminated less than forbs; and (4) early flowering species discriminated more than the later flowering ones. These comparisons suggested that (1) species active only during the initial, less stressful months of the growing season used water less efficiently, and (2) that physiological responses increasing the ratio of carbon fixed to water lost were common in these grassland species, and were correlated with the increase in evaporative demand and the decrease in soil moisture.