The forest growth/hydrology model FORGRO–SWIF, consisting of a forest growth and a soil water model, was applied to quantify the inter-annual variability of the carbon and water budgets of a Douglas-fir forest (Pseudotsuga menziessii (Mirb.) Franco) in The Netherlands. With these budgets, the water use efficiency, the amount of water needed to fix a certain amount of carbon, and its variability was estimated. After testing the model performance in simulating daily carbon and transpiration fluxes, and soil water contents of this forest ecosystem, the model was applied to a 10-year period of meteorological data. Two forest parameterisations were used: the non-thinned situation of 1995, and the thinned situation in 1996. Relations between forest water use and forest growth were quantified with the model. The model performed satisfactory, an R2 value for daily carbon fluxes of 0.58 and for daily transpiration fluxes 0.81. The forest showed to be a clear carbon sink, in the climax situation between 1000 and 1210 g C m-2 per year. In the thinned situation the carbon uptake was more than halved to values between 430 and 620 g C m-2 per year. The calculated yearly WUE's for the forest were between 2.5 and 4.3 g C m-2 mm-1 and for the total ecosystem between 1.1 and 2.0 g C m-2 mm-1. The thinned forest had clearly lower WUE's than the non-thinned forest. The importance of including interception evaporation as forest water use is discussed, and the results showed the importance of integration of forest growth and forest water use for calculating yearly carbon and water budgets.