This study examines the hydrological recovery of two regenerating boreal trembling aspen (Populus tremuloides Michx.) dominated stands and the sensitivity of that regeneration to drought within the first 5 years of establishment. The results indicate that evapotranspiration fluxes and water-use efficiency rebounded quickly as a result of new vegetation foliage growth and wet conditions found within the first 2 years following the harvest. However, a period of dry years had a significant influence on rates of postharvest growth, carbon dioxide (CO2), and water fluxes at these sites. The northern study area (NSA) and southern study area (SSA) were harvested in the winters of 2007 and 2008, respectively. The first and second years of regeneration at the SSA and NSA, respectively, were marked by an early spring thaw and higher-than-normal precipitation, while air temperatures remained slightly above the 30-year normal. During this period, mean measured height of vegetation tripled at both sites, and cumulative evapotranspiration was approximately 60% of that prior to harvest by the end of the second year of growth. By the third year (2009), the NSA became a sink for atmospheric CO2 during the snow free season (days of the year 128–238) despite low precipitation during the latter half of the summer. Volumetric soil moisture content in 2009 was the highest (on average) of the 5 years examined due to heavy snowfall and a late start to the growing season (where air temperatures consistently exceeded 0 °C), resulting in sustained productivity. However, cumulative annual precipitation also declined to 79% and 57% in 2009 and 2010, respectively, of the 30-year normal for that region, leading to significant (lagged) declines in forest productivity at the NSA in 2010 and 2011. This resulted in the site becoming a source of CO2 to the atmosphere during the 2010 and 2011 growing seasons (annual balance was not measured). Throughout the drought period (2009, 2010, and 2011), mean stand height increased by only 15%, 11%, and 14%, respectively, compared with the mean stand height in 2008. Water-use efficiency also declined in 2010 and 2011, whereas differences in light-use efficiency did not vary significantly because foliage was maintained (i.e., leaves did not abscise as a result of drought). The results of this study indicate that regenerating aspen stands are sensitive to drought and respond relatively quickly to changes in the soil moisture regime. This is important because regional drying as a result of predicted climatic changes combined with increased industrial activity may result in significant decline in productivity within these stands over broad regions.