The combined study of carbon (C) and oxygen (O) isotopes in plant organic matter has emerged as a powerful tool for understanding plant functional responses to environmental change. The approach relies on established relationships between leaf gas exchange and isotopic fractionation to derive a series of model scenarios that can be used to infer changes in photosynthetic assimilation and stomatal conductance driven by changes in environmental parameters (CO₂, water availability, air humidity, temperature, nutrients). We review the mechanistic basis for a conceptual model, in light of recently published research, and discuss where isotopic observations do not match our current understanding of plant physiological response to the environment. We demonstrate that (1) the model was applied successfully in many, but not all studies; (2) although originally conceived for leaf isotopes, the model has been applied extensively to tree-ring isotopes in the context of tree physiology and dendrochronology. Where isotopic observations deviate from physiologically plausible conclusions, this mismatch between gas exchange and isotope response provides valuable insights into underlying physiological processes. Overall, we found that isotope responses can be grouped into situations of increasing resource limitation versus higher resource availability. The dual-isotope model helps to interpret plant responses to a multitude of environmental factors.