Climate change is expected to exacerbate drought for many plants, making drought tolerance a key driver of species and ecosystem responses. However, predicting responses from traits requires greater understanding of how physiological processes impact ecology. I developed new theory and methods and applied meta-analyses to characterize the ecological impacts of leaf drought tolerance. I compared the predictive ability of several traits for ecological drought tolerance and showed that the leaf water potential at turgor loss point, or wilting (πtlp), was the strongest predictor of species’ habitat water supply. I then showed that the main driver of πtlp was the osmotic potential at full hydration (πo), or the solute concentration of a hydrated cell. Thus, plants achieve greater leaf drought tolerance by accumulating solutes in the leaf cells. I then developed a new method to rapidly estimate πtlp from measurements of πo. This method is 30x faster than the standard, making it feasible to characterize drought tolerance for many species within diverse clades and communities. Plasticity - the ability of individual plants to change trait values - is expected to strongly influence species’ responses to climate change. I meta-analyzed plasticity in πtlp and showed that, while most species became more drought tolerant under dry conditions, πtlp from wet or dry conditions and not plasticity predicted species distributions. Thus, πtlp measured in one season can reliably characterize most species’ ecological drought tolerances. Drought tolerance traits are also expected to impact species distributions within ecosystems through effects on habitat associations and competition. I showed that πtlp was a strong driver of habitat associations in a tropical community, and that drought tolerant species were significantly spatially clustered, suggesting drought tolerant species exclude sensitive species through hierarchical competition. Finally, plant drought tolerance is determined by multiple traits. I applied meta-analyses to evaluate general patterns in the relationships among hydraulic, stomatal, and wilting traits, and produce a framework for predicting plant responses to a wide range of water stress from one or two sampled traits. Overall, these findings provide insight into the impacts of leaf drought tolerance on plant ecology at community and global scales.