The phenotype of a plant can be shaped by the biotic and abiotic conditions to which their parents are subjected. This phenotypic plasticity known as maternal environmental effect occurs regardless of the changes in the DNA sequences. Whereas the effect of the maternal environment on plant phenotype has been studied, its specific influence on plant physiology is less clear. This study considered the influence of the maternal environment on the regulation of plant morphology and physiology in progeny of Eucalyptus grandis. Plants were grown from seeds collected from two E. grandis clonal seed orchards that differed in environmental conditions (e.g. precipitation). Plant relative growth rate (RGR), leaf gas exchange and water use efficiency (WUE) were measured in the seedlings. RGR was 10% higher in the offspring from the maternal environment receiving higher precipitation levels. Leaf gas exchange, specifically leaves intercellular CO2, and intrinsic WUE were also influenced by maternal environments. Intrinsic WUE was significantly lower in the orchard that received lower precipitation levels. The results demonstrate that the maternal environment can regulate the physiology of E. grandis in the subsequent generation. These analyses are useful to optimise tree improvement in a changing environment. Moreover, in a scenario of climate change, maternal environmental effects may be a crucial mechanism for certain species to get acclimated to sudden changes in environmental conditions.