Woody plants with green photosynthetic stems are common in dry woodlands with the possible advantages of extra carbon gain, re-assimilation of CO2, and high water-use efficiency. However, their green stem tissue may also incur greater costs of water loss when stomata are closed. Our study focussed on evaluating the costs and benefits of having green stems in desert plants, addressing the water-use efficiency hypothesis. We measured water status, carbon and water exchange, and carbon, nitrogen and oxygen isotopic composition of 15 species in a desert wash scrub in Joshua Tree National Park, California, USA. We found that all woody species that have green stems relied on their green stems as the sole organ for carbon assimilation for most of the study period. Green stems had similar photosynthetic rate (Amax), stomatal conductance (gs) and intrinsic water-use efficiency (WUEi) to leaves of the same species. However, Amax, gs and cuticular conductance (gmin) were higher in green stems than in leaves of non-green stemmed species. Carbon isotopic composition (δ13C) was similar in both leaves and green stems, indicating no difference in integrated long-term WUE. Our results raise questions about the possible trade-off between carbon gain and water loss through the cuticle in green stems and how this may affect plant responses to current and future droughts.