The Mediterranean is among the regions predicted to be most affected by climate change due to rising temperatures and increasing frequency as well as intensity of extreme weather events, such as drought. These shifts in climatic conditions might lead to changes in species community composition by enabling the increase of drought-tolerant species at the expense of less tolerant ones. This hypothesis was tested in the current study using chlorophyll fluorescence data from a 21-year precipitation exclusion experiment in a Mediterranean forest for two co-dominant Quercus ilex and Phillyrea latifolia species with contrasting low and high levels of drought tolerance, respectively. The maximum potential quantum efficiency of photosystem II (PSII) (Fv/Fm), photochemical efficiency of PSII (yield), and non-photochemical quenching (NPQ) varied seasonally. Fv/Fm and NPQ levels were positively correlated with air temperature and Standardized Precipitation-Evapotranspiration Index (SPEI), whereas yield, which was greater under drought treatment was negatively associated with vapor pressure deficit and SPEI. Fv/Fm values showed similar increase in the two species over the 21-year study period regardless of treatment and in parallel to progressive warming. In contrast, yield values were higher in Q. ilex than in P. latifolia, while NPQ values were higher in P. latifolia than in Q. ilex. Notably, high yield values were also observed in the drought treated plots. Throughout the study, plants in the drought treated plots exhibited decreased basal area, leaf biomass, and aerial cover due to high stem mortality. In addition, a continuous increase in temperature was detected in summer and autumn, which might explain the observed increase in Fv/Fm values over the study period. Higher yield and lower NPQ detected in Q. ilex could be attributed to less competition for resources in the drought treated plots and acclimation of Q. ilex plants over the study period. Our results indicate that reduction in stem density could improve forest resilience to climate change-induced drought conditions.