Recent evidence pointed to functional stomata on the abaxial side of barley leaf sheaths. However, the extent to which variation in sheath stomata densities (SD SheathAb) drives canopy water use and whether it has a genetic basis remains unknown. To address this, we phenotyped, twice, a mapping population consisting of 156 barley genotypes (936 plants) for their abaxial and adaxial leaf sheath and blade SDs, whole-plant transpiration rate (TR) and canopy conductance (Gs). Across the four SD traits, SD SheathAb exhibited the highest repeatability (0.73) and was the only one that correlated significantly and positively with TR and Gs. None of the quantitative trait loci (QTL) controlling leaf blade SD co-localized with TR and Gs QTL. In contrast, a major QTL common to SD SheathAb, TR and Gs was found on Chr 2H (PVE up to 50%), and mapped to a region enriched in F-box protein genes that included Ppd-H1. Gas exchange measurements confirmed that increases in SD SheathAb cause higher sheath-based transpiration, photosynthesis and stomatal conductance, and that sheath transpiration positively tracked with TR. Our investigation provides first-time evidence that genetic manipulation of SD SheathAb could improve crop water-use efficiency, with no apparent trade-offs with leaf blade gas exchange.