Beneficial and negative effects of species interactions can strongly influence water fluxes in forest ecosystems. However, little is known about how trees dynamically adjust their water use when growing with interspecific neighbours. Therefore, we investigated the interaction effects between Fagus sylvatica (European beech) and Picea abies (Norway spruce) on water-use strategies and aboveground structural characteristics. We used continuous in situ isotope spectroscopy of xylem and soil water to investigate source water dynamics and root water uptake depths. Picea abies exhibited a reduced sun-exposed crown area in equally mixed compared with spruce-dominated sites, which was further correlated to a reduction in sap flow of -14.5 ± 8.2%. Contrarily, F. sylvatica trees showed +13.3 ± 33.3% higher water fluxes in equally mixed compared with beech-dominated forest sites. Although a significantly higher crown interference by neighbouring trees was observed, no correlation of water fluxes and crown structure was found. High time-resolved xylem δ2H values showed a large plasticity of tree water use (-74.1 to -28.5‰), reflecting the δ2H dynamics of soil and especially precipitation water sources. Fagus sylvatica in equally mixed sites shifted water uptake to deeper soil layers, while uptake of fresh precipitation was faster in beech-dominated sites. Our continuous in situ water stable isotope measurements traced root water uptake dynamics at unprecedented temporal resolution, indicating highly dynamic use of water sources in response to precipitation and to neighbouring species competition. Understanding this plasticity may be highly relevant in the context of increasing water scarcity and precipitation variability under climate change.