Climate change has intensified summer drought and high solar radiation in Mediterranean ecosystems, generating abiotic stress that limits the establishment of riparian species. We conducted a nursery experiment to evaluate the effects of two levels of water availability and light intensity on the growth and physiological responses of two native riparian species from Mediterranean Chile: Drimys winteri and Persea lingue. A bi-factorial design combined two irrigation treatments (well-watered and water restriction) and two light intensity levels manipulated through a light protection treatment (20% shade mesh and full light exposure). Water restriction was applied gradually until 15–20% (v/v) substrate moisture, defined as maximum water restriction, followed by rehydration. Morphological variables (height, root collar diameter, and shoot-to-root ratio) and physiological traits (predawn water potential, chlorophyll fluorescence, and electron transport rate) were measured. Growth responses were affected by the light protection treatment, which promoted a significant height growth in both species. Water stress affected the global response of both species but they differed in their post-stress hydraulic recovery: P. lingue fully recovered its predawn water potential, whereas Drimys winteri did not. Our study provides measurable and quantifiable values that demonstrate the sensitivity of these species to water stress.