Under non-stressed conditions the net photosynthetic rate (PN) of the mutant plants cbp20 of Arabidopsis was similar to that of the wild type (WT). In response to water deprivation, however, PN started to decrease later in the mutants and remained substantially higher. Thermoluminescence measurements showed that the lipid peroxidation induced by severe water stress was also less pronounced in the mutant than in the WT. Both soil gravimetric and plant water potential data showed that cbp20 mutants lose water more slowly than the WT plants. The drought-induced decline in Fv/Fm, the quantum efficiency of photosystem 2, and photochemical quenching parameters also started later in the cbp20 mutants than in the WT plants. Thus the restricted gas exchange in the cbp20 mutants does not impair the photosynthetic performance of the plant; however, under drought improved water retention provides significant protection for the photosynthetic apparatus.