Water-use efficiency (WUE) is an under-researched but very important drought tolerance trait for forage breeding purposes. This research evaluated morpho-physiological traits linked to agronomic water-use efficiency (WUE _A) and its proxy measures based on δ ¹³C (WUE _i) or gas exchange (evapotranspiration, WUE _AET, or stomatal conductance WUE _ASC) and their quantitative genetic parameters (QGPs) of 400 half-sib family genotypes of Lolium perenne L. (PRG) in a 5-month soil drought cycle spanning field capacity (FC), 85–90% FC, 55–65% FC, 45–55% FC, and <55% FC (post-cutting regrowth). Principal component analysis (PCA) of trait data distinguished a group of PRG genotypes where high WUE _A and pasture yield were associated with a distinctive deep rooting pattern and improved leaf hydration at more negative leaf osmotic and water potentials. Plants with this trait association sustained net assimilation and soil moisture reserves throughout the drought cycle. Estimated QGPs including high narrow-sense heritability ( h n 2 > 0 . 7 ; p < 0 . 05 ) of key traits emphasized the genetic potential of the identified trait combination for selecting PRG for improved drought tolerance. PCA and estimates of QGPs revealed a weak association between WUE _A, WUEi, WUE _ASC, or WUE _AET under the conditions tested. The results highlight the preferability of WUE _A over its proxy measures in defining PRG drought tolerance.