Plant stomata mediate the fluxes of both carbon and water between the land and the atmosphere. The ratio between photosynthesis and stomatal conductance (gs), or intrinsic water-use efficiency (iWUE), can be directly inferred from leaf or tree-ring carbon isotope composition. In many Earth system models, iWUE is inversely proportional and controlled by a parameter (g1M) in the calculation of gs. Here we examine how iWUE perturbations, setting g1M to the 5th (low) and 95th (high) percentile for each plant type based on observations, influence photosynthesis using coupled Earth System model simulations. We find that while lower iWUE leads to reductions in photosynthesis nearly everywhere, higher iWUE had a photosynthetic response that is surprisingly regionally dependent. Higher iWUE increases photosynthesis in the Amazon and central North America, but decreases photosynthesis in boreal Canada under fixed atmospheric conditions. However, the photosynthetic response to higher iWUE in these regions unexpectedly reverses when the atmosphere dynamically responds due to spatially differing sensitivity to increases in temperature and vapor pressure deficit. iWUE also influences the photosynthetic response to atmospheric CO2, with higher and lower iWUE modifying the total global response to elevated 2x preindustrial CO2 by 6.4% and -9.6%, respectively. Our work demonstrates that assumptions about iWUE in Earth system models significantly affect photosynthesis and its response to climate. Further, the response of photosynthesis to iWUE depends on which components of the model are included, therefore studies of iWUE impacts on historical or future photosynthesis can not be generalized across model configurations.