Water availability regulates plant community dynamics but the drought response of seedlings remains poorly known despite their vulnerability, especially for the Asian tropics. In particular, discerning how functional traits of seedlings mediate drought response can aid generalizable predictions of tree responses to global environmental change. We assessed interspecific variation in drought response explained by above- and below-ground seedling traits. We conducted a dry-down experiment in the greenhouse using 16 tree species from the humid forests of Western Ghats in southern India, chosen to represent differences in seasonality affiliations–sites of high and low seasonal drought. We compared seedling survival, growth, and photosynthetic performance under drought and well-watered conditions, and assessed the extent to which species responses were explained by seasonality affiliation and 12 traits of root, stem and leaf. We found that the species from seasonally dry forest reduced photosynthetic rate in drought compared to well-watered conditions, but seasonality affiliation did not explain differences in growth and survival. Performance changes in drought vs well-watered conditions were best explained by anatomical traits of xylem, veins and stomata. Species with larger xylem reduced their growth and photosynthesis to tolerate desiccation. In drought, species with smaller stomata showed reduced survival even though photosynthetic activity decreased by a larger extent with larger stomata. Our study shows that anatomical traits related to xylem and stomata, directly related to water transport and gas-exchange, played a more prominent role than commonly used soft traits (e.g., specific leaf area, wood density) in explaining species response to drought, and may offer a better proxy for physiological traits related to drought tolerance of seedlings.