In tropical forests, severe droughts caused by El Niño events may strongly influence the water relations of tree seedlings and thereby increase their mortality. Data on known-aged seedlings of three common shade-tolerant canopy tree species (Trichilia tuberculata, Tetragastris panamensis and Quararibea asterolepis) in a Panamanian moist forest are presented. Seedling survival during a severe El Niño dry season (1997-98) was compared with prior long-term survival data, and levels of drought stress were assessed by measuring plant water potentials and gas exchange characteristics. Contrary to prediction, dry-season seedling survival was not dramatically reduced in any species compared with that expected in ‘normal’ years. In Trichilia and Quararibea, pre-dawn water potentials averaged −2 MPa and midday water potentials about −3 MPa. Stomatal conductances were very low, averaging 26 mmol m-2 s-1 for Tetragastris and 11–13 mmol m-2 s-1 for Trichilia and Quararibea. Photosynthetic rates also were very low but consistently positive, averaging 0.8–1.1 μmol m-2 s-1. The findings suggest that, once established, seedlings of common tree species in this semi-deciduous forest may be tolerant of drought events.