Potential land–climate feedbacks in subarctic regions, where rapid warming is driving forest expansion into the tundra, may be mediated by differences in transpiration of different plant functional types. Here, we assess the environmental controls of overstorey transpiration and its relevance for ecosystem evapotranspiration in subarctic deciduous woodlands. We measured overstorey transpiration of mountain birch canopies and ecosystem evapotranspiration in two locations in northern Fennoscandia, having dense (Abisko) and sparse (Kevo) overstories. For Kevo, we also upscale chamber‐measured understorey evapotranspiration from shrubs and lichen using a detailed land cover map. Subdaily evaporative fluxes were not affected by soil moisture and showed similar controls by vapour pressure deficit and radiation across sites. At the daily timescale, increases in evaporative demand led to proportionally higher contributions of overstorey transpiration to ecosystem evapotranspiration. For the entire growing season, the overstorey transpired 33% of ecosystem evapotranspiration in Abisko and only 16% in Kevo. At this latter site, the understorey had a higher leaf area index and contributed more to ecosystem evapotranspiration compared with the overstorey birch canopy. In Abisko, growing season evapotranspiration was 27% higher than precipitation, consistent with a gradual soil moisture depletion over the summer. Our results show that overstorey canopy transpiration in subarctic deciduous woodlands is not the dominant evaporative flux. However, given the observed environmental sensitivity of evapotranspiration components, the role of deciduous trees in driving ecosystem evapotranspiration may increase with the predicted increases in tree cover and evaporative demand across subarctic regions.