As a response to the increased pressure of global climate change on most ecosystems, national and international agreements aim at creating forests that are productive, resilient to climate change, and that store carbon to mitigate global warming. However, these aims are being challenged by increased tree mortality rates and decreased tree growth rates in response to increased incidence of extreme drought events. These phenomena make us aware of a lack of crucial insights into the effects of forest management on the growth and survival of trees, and on carbon storage in both trees and forest soils under increased incidence of drought. Here we compile current knowledge on how forest management and drought impact on tree growth and survival, and above- and belowground carbon storage in forest ecosystems. Based on this, we propose that climate-smart forestry may benefit from controlling stand density at intermediate levels (>60%, e.g.~80%) by applying low levels of tree harvest intensity on a regular base. Furthermore, we propose that the actual optimal density will depend on the tree species, site conditions and management history. As a next step, studies are needed that take an above- and belowground approach and combine forest experiments with mechanistic models on water, carbon and nutrient flows in trees and soils within forests in order to transform current results, which focus on either soil or trees and are often highly-context dependent, to a more generic forest framework. Such a generic framework would be needed to enhance understanding across forest ecosystems on how forest management may promote forest resilience, productivity and carbon storage with increasing drought.