Since prolonged droughts have impacted Atlantic forests in Southeastern Brazil, further investigations to understand the effects of such stressful conditions in their hydrological behavior are required. This study aimed to assess the changes in the water balance of a semi-deciduous Atlantic forest remnant and how the forest responds to droughts. The Standardized Precipitation-Evapotranspiration Index was applied to identify droughts (from 1961 to 2019) and their severity in both the hydrological year and summer scales. Drought impacts on actual evapotranspiration, potential percolation, and soil water storage were assessed using Hydrus-1D, having net precipitation and potential evapotranspiration as inputs. Error analyses (< 10%) confirmed Hydrus-1D suitability for simulating soil moisture. Uncertainties regarding the soil saturated hydraulic conductivity are due to preferential flows, which are not accounted for in Richards’ equation. Drought intensification changed forest hydrology and triggered physiological responses to deal with it. Semi-deciduous Atlantic forests are adapted to dry conditions because of the existence of dry-affiliated species and the activation of physiological mechanisms. However, such adaptations responded differently regarding the drought scales. The intensification of summer droughts increased evapotranspiration and decreased the potential percolation. Leaf shedding changed the canopy structure in a two-year time lag as a response to the intensification of hydrological year droughts. Changes in forest hydrology are sudden and trigger physiological responses, such as leaf shedding, in a delayed process after droughts take place.