Mulching is used to conserve soil moisture during the establishment phase of hardwood plantations in subtropical Australia since further expansion of these plantations increasingly occurs in low rainfall areas (600-900 mm rainfall annually), where water stress is a major factor affecting plantation establishment and productivity. We measured the stand leaf area index (LAI) and leaf-level physiological traits of two establishing hardwood plantations in subtropical Australia by using gas exchange and stable isotopic techniques. The blackbutt (Eucalyptus pilularis) plantation is located in Pechey (average rainfall of 851 mm annually) and the spotted gum (Corymbia citriodora subsp. Variegata) plantation in Proston (average rainfall of 601 mm annually), southeast Queensland, Australia. The distance between the two plantations is about 200 km. The results showed that mulching had no impact on tree height, stand LAI and leaf-level physiological traits of blackbutt trees. Thus, the mulch treatment did not increase the amount of water used by the blackbutt plantation. In contrast, mulching decreased foliar carbon (d13C) and oxygen (d18O) isotope compositions in the lower canopy zone, but increased the stand LAI and tree height in the young spotted gum plantation, which suggests that mulching increased the amount of water used by the spotted gum plantation. The contrasting results indicate that mulching does not guarantee increased tree growth and improved leaf-level physiological traits of hardwood plantations during the establishment phase. Tree growth and physiological response of hardwood plantations to mulching depend on the eco-physiological traits of trees and environmental factors.