Adaptation to extreme drought is rare in trees. The Australian conifer genus Callitris contains the world’s most drought-adapted tree species, and is the only conifer that occurs across most of the Australian continent. Callitris has diversified into climatic niches that have proved fatal to other conifer lineages, but without any apparent cost to hydraulic efficiency. Callitroid thickening is a woody trait common to all Callitris species. Because of its ecological associations, it has been suggested that it is an adaptation to drought: species in drier niches have a higher frequency of thickenings than those in wet niches. Using macroevolutionary methods and niche modelling, I show that the evolution of callitroid thickening explains drought adaptation and ecological diversification in the genus. Future climate models indicate that compared to their nearest relatives, Callitris species with higher frequencies of callitroid thickening a have a reduced extinction risk.