Climate change is expected to increase the frequency and intensity of extreme weather events such as droughts. Thus, mountain forests in the European Alps will increasingly be affected by dry periods. However, trees will react differently to meteorological droughts depending on species, the timing of the drought, and site conditions such as elevation, micro topography and soil characteristics. Here we analyze physiological drought indicators derived from multiple years of dendrometer and sap flow measurements on European Larch (Larix decidua) and co-occurring evergreen conifers (Pinus nigra, Picea abies, Pinus cembra) along an elevation gradient in the inner-alpine dry valley of Matsch/Mazia in Northern Italy. We determine the variability of drought reaction of different trees and species within each site and at different elevations. We also compare them with meteorological (SPI, SPEI) and soil moisture-based (REW) drought indicators to check for thresholds which cause a tree response and seasonality effects. Preliminary results show an expected decrease of physiological drought indicators with increasing elevation and a stronger reaction of evergreen conifers compared to European Larch. In the future we plan to combine these results with ongoing xylogenesis and wood anatomy measurements to get a clear picture on the impact of drought on the cellular basis of wood formation. Overall, this study will improve the understanding of drought impact on tree growth and vitality in mountain forests.