Olive trees are one of the most representative horticultural crops of the Mediterranean environments. Its plethora of physiological mechanisms of response to water stress have made of this species one of the most studied ones in this respect in the literature in the last two decades. Also, despite being exalted as one of the stereotypes of dry-farming crop, olive trees' generous response to irrigation has demanded a large amount of work on how to manage them in the very water scarce environment where they are grown. In this chapter we will not do another review of the physiological mechanisms of response of olive trees to water stress. Nonetheless, we intend to integrate all of them, with the help of mechanistic models, to unravel which are the consequences, trade-offs, and limits of the implementation of these mechanisms for the plant in response to drought events. Once this is achieved, we will answer questions such as: Why can olive trees afford to drop their water potential by osmotic adjustment while other crops like grapevine cannot? What are the causes behind the change in the relationship between stomatal conductance and leaf water potential during acclimation to water stress? What is the role of abscisic acid (ABA) in the regulation of stomatal conductance in response to water stress? And, in light of these findings, what is the most appropriate physiological variable to assess the level of water stress in olive trees and what should the optimal plant-based sensor measure to help us manage deficit irrigation?