Differential adaptation to local environmental conditions is thought to be an important driver of speciation. Plants, whose sedentary lifestyle necessitates fine-tuned adaptation to edaphic conditions such as water availability, are often distributed based on these conditions. Populations occupying water-limited habitats may employ a variety of strategies, involving numerous phenotypes, to prevent and withstand desiccation. In sympatry, two closely related Mimulus species – M. guttatus and M. nasutus – occupy distinct microhabitats that differ in seasonal water availability. In a common garden experiment, we characterized natural variation within and between sympatric M. guttatus and M. nasutus in the ability to successfully set seed under well-watered and drought conditions. We also measured key phenotypes for drought adaptation, including developmental timing, plant size, flower size, and stomatal density. Consistent with their microhabitat associations in nature, M. nasutus set seed much more successfully than M. guttatus under water-limited conditions. This divergence in reproductive output under drought was due to differences in mortality after the onset of flowering, with M. nasutus surviving at a much higher rate than M. guttatus. Higher seed set in M. nasutus was mediated, at least in part, by a plastic increase in the rate of late-stage development (i.e., fruit maturation), consistent with the ability of this species to inhabit more ephemeral habitats in the field. Our results suggest adaptation to water availability may be an important factor in species maintenance of these Mimulus taxa in sympatry.