Faidherbia albida is one of the scattered trees commonly intercropped with most cereals in Ethiopia due to its positive impacts. The tree is pruned for various purposes including for fencing and fuelwood. In this study, the impact of pruning on water relations of F. albida and on understorey wheat productivity was investigated. The on-farm study was conducted in Ejerssa Joro, semi-arid Ethiopia. Six mature trees were selected; three were fully pruned and three were left unpruned. Sap flow and leaf water potential were measured on these trees. Crop gas exchange, aboveground biomass and grain yield were measured under and outside tree canopies. The highest and the lowest sap volumes, recorded from unpruned F. albida, during the dry period, were 153 L day−1 and 20 L day−1, respectively. The highest and the lowest sap volumes were 13.4 L day−1 and 0.04 L day−1 recorded during the wet period. Wheat CO2 assimilation was highest (7.8 µmolm−2 s−1) at 1 m distance and declined away from the tree trunk under unpruned trees. Aboveground biomass and grain yield under unpruned treatments were significantly (P < 0.05) higher than outside of canopy of same tree and outside canopies of pruned trees. Pruning reduced aboveground biomass and grain yield by 30% and 27%, respectively; despite the higher water uptake by unpruned trees. We recommend that intensive pruning of F. albida be discouraged and propose further studies on optimal pruning for increased food production and provision of tree products to meet farmers’ needs.