The impact of water availability on the photosynthetic performance of three year old, commercially obtained, Sitka spruce ( Picea sitchensis) seedlings under exposed and shaded conditions was evaluated to provide a physiological understanding of the factors controlling seedling performance under conventional and continuous cover forestry (CCF) management scenarios. Decreases in photosynthesis in response to water deficits, under exposed and shaded conditions, were associated with reductions in both stomatal (G(s)) and mesophyll conductance (G(m)), and an increase in the proportion of electrons consumed in non-photosynthetic pathways. After re-watering, photosynthesis of plants subjected to higher irradiances was inhibited for up to 6 days due to high photorespiratory activity and damage to photosystem II. Waterlogged seedlings grown under both exposed and shaded conditions showed smaller decreases in photosynthesis that were also associated with an altered G(s) and G(m), but no changes in chlorophyll fluorescence related parameters were observed. We conclude that the performance of seedlings will be more susceptible to management-related or environmentally-induced water deficits in exposed sites typical of temperate latitudes and may, therefore, be improved in CCF systems.