Tree intrinsic water-use efficiency (iWUE) has dramatically increased in recent decades in global forests. The rising iWUE can be a result of either enhanced photosynthesis rate (A), or decreased stomatal conductance (gs) or both. The underlying physiological mechanisms are still not well understood. Here, we investigated tree-ring isotopes δ13C and δ18O from two tree species in three altitudinal transects on the Southeastern Tibet. We found that the relationship between iWUE and leaf water 18O (Δ18Olw) was negative at the low-altitude forests but are positive at the treeline, indicating that enhanced photosynthesis was the main driver of the increasing iWUE at the treeline, whereas reduction in stomatal conductance was the prime regulator at the lower-elevation forests. Furthermore, vapor pressure deficit (VPD) and precipitation during the main growing season showed the highest and significant correlations with Δ18Olw at the low-altitude forests, suggesting that gs was strongly controlled by moisture conditions in the growing season particularly in the low-altitude forests. These findings shed light to a better understanding of the regulatory mechanism of iWUE changes under the background of rising atmospheric CO2 and climate change and serve to improve the reliability of ecophysiological modelling.