Plant water relations are critical for determining the distribution, persistence, and fitness of plant species. Studying the genetic basis of ecologically relevant traits, however, can be complicated by their complex genetic, physiological, and developmental basis and their interaction with the environment. Water use efficiency (WUE), the ratio of photosynthetic carbon assimilation to stomatal conductance to water, is a dynamic trait with tremendous ecological and agricultural importance whose genetic control is poorly understood. In the present study, we use a quantitative trait locus-mapping approach to locate, fine-map, clone, confirm, and characterize an allelic substitution that drives differences in WUE among natural accessions of Arabidopsis thaliana. We show that a single amino acid substitution in an abscisic acid-responsive kinase, AtMPK12, causes reduction in WUE, and we confirm its functional role using transgenics. We further demonstrate that natural alleles at AtMPK12 differ in their response to cellular and environmental cues, with the allele from the Cape Verde Islands (CVI) being less responsive to hormonal inhibition of stomatal opening and more responsive to short-term changes in vapor pressure deficit. We also show that the CVI allele results in constitutively larger stomata. Together, these differences cause higher stomatal conductance and lower WUE compared with the common allele. These physiological changes resulted in reduced whole-plant transpiration efficiency and reduced fitness under water-limited compared with well-watered conditions. Our work demonstrates how detailed analysis of naturally segregating functional variation can uncover the molecular and physiological basis of a key trait associated with plant performance in ecological and agricultural settings.