Living mulch intercropping systems are considered as nature-based solutions with a low environmental footprint for managing weeds, improving biodiversity and agroecosystem sustainability. In drylands, however, they may increase intra/inter-specific competition for water, reducing crop productivity. We tested conservation tillage (TLG) carob plots with and without irrigation (TLG(irr); TLG(dry)) vs. rainfed intercropping systems of carob and (i) thyme (Thymbra capitata; T-System) or (ii) clover (Trifolium squarrosum; C-System), strategically planted on the south (sun)-exposed soil side (SES) of carobs, to reduce soil temperature/evaporation. Carob water relations, productivity and environmental footprints were examined for three years under semi-arid, low weed-competition (Skarinou-SKR) and arid high weed-competition (Vrysoules-VRY) conditions in Cyprus. Carob yield efficiency (kg/m(3)) in SKR, was >27% higher for the T-System (p < 0.05; SES cover ca. 85%; year-3), matching a higher leaf water content (p < 0.001) compared to TLG(dry). The T-System reached 28% and 56% of TLG(irr) yields during very dry and normal rainfall years; TLG(dry) yields approached zero. For VRY, no negative impacts on carob leaf water, at 25% SES cover, were found. SKR's C-System improved leaf water content (p < 0.05) for only one year. The T-System also outperformed TLG(irr) and TLG(dry) in terms of reducing irrigation needs and energy consumption, breaking new grounds for dryland agroforestry.