Water potential is a useful predictive tool in irrigation scheduling as it, or a component, is associated with physiological responses to water deficit. Increasing atmospheric demand for water increases transpiration and decreases water potential for the same stomatal conductance. However, based on supply by the soil-plant-atmosphere-continuum, decreasing soil water potential should decrease stomatal conductance and thus transpiration but also decrease water potential. Such contradictory behavior of supply and demand responses, may limit the value of water potential as an indicator of plant water status. This work studied the relationship between plant water potential and transpiration affected by supply (soil moisture) and atmospheric evaporative demand, and has implications for interpretation of water potentials and irrigation management. Results were that plant water potential has a narrow range of sensitivity to variation in supply and demand in hydrated soils, but greatly varying sensitivity in dry soils, limiting interpretation under dry conditions. Loss of soil conductance in dry, coarse soil types affects the trajectory of plant water potential response to supply and demand. Sapflow measurements on almonds indicated that variation in reference evapotranspiration and/or soil moisture deficit led to similar variation in stem water potentials to that predicted by the model. The model indicates hypotheses that with further testing may have important repercussions on the measurement of plant water use and irrigation scheduling.