This study investigated altitudinal changes in leaf-lamina hydraulic conductance (KL) and leaf morphological traits related to KL using five Rhododendron species growing at different altitudes (2500–4500 m above sea level) in Jaljale Himal region in eastern Nepal. Sun leaves were collected from the highest and the lowest altitude populations of each species, and KL was measured with a high pressure flow meter method. Leaf-lamina hydraulic conductance ranged from 7.7 to 19.3 mmol m−2 s−1 MPa−1 and was significantly positively correlated with altitude. The systematic increase with altitude was also found in KL, leaf nitrogen content and stomatal pore index. These relationships suggest that plants from higher-altitude habitats had a large CO2 supply to the intercellular space in a leaf and high CO2 assimilation capacity, which enables efficient photosynthesis at high altitude. The variation in KL was associated with the variation in several leaf morphological traits. High KL was found in leaves with small leaf area and round shape, both of which result in shorter major veins. These results suggest that the short major veins were important for efficient water transport in unlobed leaves of Rhododendron species. The extent of lignification in bundle sheaths and bundle sheath extension was associated with KL. Lignified compound primary walls inhibit water conduction along apoplastic routes. All species analyzed had heterobaric leaves, in which bundle sheath extensions developed from minor veins, but strongly lignified compound primary walls were found in Rhododendron species with low KL. It is still unclear why cell walls in bundle sheath at minor veins were markedly lignified in Rhododendron species growing at lower altitude. The lignified cell wall provides a high pathogenic resistance to infection and increases the mechanical strength of cell wall. The data imply that lignified bundle sheath may provide a trade-off between leaf hydraulic efficiency and leaf mechanical toughness or longevity.