Alpine forests are increasingly exposed to rising temperatures and intensified drought, potentially pushing species beyond their tolerance limits. However, the extent to which rising atmospheric CO2 (Ca) can mitigate these stressors by enhancing tree intrinsic water-use efficiency (iWUE) remains unclear. We investigated the growth and physiological responses of Himalayan fir (Abies spectabilis) using basal area increment (BAI) and δ13C data to track ecophysiological processes over recent decades along an altitudinal gradient in regions with hydrologically distinct regions on the Tibetan Plateau. Significant growth increases were observed at all altitudes in wet regions, while negative growth trends were noted at lower altitudes in dry regions. Climate–growth correlation analysis revealed that growth is primarily constrained by growing season temperatures and spring moisture availability. Tree iWUE increased over time at all altitudes, with a stronger increase in wet regions. Tree growth at lower altitudes in dry stands was negatively related to iWUE, whereas BAI in wet regions was positively associated with iWUE during the post-1965 period. Structural equation modeling indicated that temperature was a key driver of BAI and iWUE at all altitudes in wet regions, while temperature had negative effects on BAI at lower altitudes in dry regions. These results suggest that elevated Ca and temperature can stimulate tree growth in high-altitude forests in wet regions, but the positive effects do not compensate for the negative impacts of reduced water availability at lower altitudes in dry regions. Warming-induced drought stress may thus emerge as a more significant driver of growth compared to increasing Ca levels in comparable alpine forests. Our findings provide critical insights for refining assumptions about CO2 fertilization and climate change effects in ecophysiological models.