Pinus brutia (pine) and Cupressus sempervirens (cypress) are two important forestry species in the Mediterranean region, with different strategies to cope with water stress. The overall goal of this study is to investigate ecohydrological processes of these two species. Specific objectives are: (i) to quantify their transpiration; (ii) to analyze relations between meteorological variables, soil moisture, sap flow, leaf conductance and twig water potential; and (iii) to assess differences in soil water balances and dynamics between three canopy cover conditions (under canopy, edge of canopy, open area). The study site is a plantation forest in Athalassa Forest Park, in Cyprus with a long-term average annual rainfall of 315 mm. The site was converted from rainfed agriculture in 2011. Observations of sap flow (12 trees for 20 months, 4 trees for 24 months) and soil moisture (66 sensors, 24 months) were made hourly. Soil moisture sensors were installed under the tree canopy, at the edge of the canopy and in the open area at 10-, 30- and 50-cm soil depths. Mid-day twig water potential ( Ψ) and leaf conductance ( gs) were measured monthly. The sap flow of cypress trees was double that of pine. Pine seems to regulate its stomata and shows less response to rainfall compared to cypress. Soil water balance computations showed that evapotranspiration from the 60-cm soil depth of the areas without tree canopy cover was higher than that of areas with canopy cover, likely due to preferential flows caused by the tree canopy and roots.