Manipulative experiments have suggested that embolism-induced hydraulic impairment underpins widespread tree mortality during extreme drought, yet in situ evidence is rare. One month after drought-induced leaf and branch dieback was observed in field populations of Eucalyptus piperita Sm. in the Blue Mountains (Australia), we measured the level of native stem embolism and characterized the extent of leaf death in co-occurring dieback and healthy (non-dieback) trees. We found that canopy dieback-affected trees showed significantly higher levels of native embolism (26%) in tertiary order branchlets than healthy trees (11%). Furthermore, there was a significant positive correlation (R2 = 0.51) between the level of leaf death and the level of native embolism recorded in branchlets from dieback-affected trees. This retrospective study suggests that hydraulic failure was the primary mechanism of leaf and branch dieback in response to a natural drought event in the field. It also suggests that post-drought embolism refilling is minimal or absent in this species of eucalypt.