Quantifying the responses of the coupled carbon and water cycles to current global warming and rising atmospheric CO2 concentration is crucial for predicting and adapting to climate changes. Here we show that terrestrial carbon uptake (i.e. gross primary production) increased significantly from 1982 to 2011 using a combination of ground-based and remotely sensed land and atmospheric observations. Importantly, we find that the terrestrial carbon uptake increase is not accompanied by a proportional increase in water use (i.e. evapotranspiration) but is largely (about 90%) driven by increased carbon uptake per unit of water use, i.e. water use efficiency. The increased water use efficiency is positively related to rising CO2 concentration and increased canopy leaf area index, and negatively influenced by increased vapour pressure deficits. Our findings suggest that rising atmospheric CO2 concentration has caused a shift in terrestrial water economics of carbon uptake.