The influence of long-term drought stress on photosynthesis of Japanese mountain birch (Betula ermanii Cham.) was examined using chlorophyll fluorescence and gas exchange measurements. Drought stress was imposed in potted plants by reducing irrigation frequency from daily (control) to twice-weekly and once-weekly. Thirty-day-old leaves, which had developed under fully stressed conditions, were used for the measurements. The decline in net CO2 assimilation rate (A) observed in situ in drought-stressed plants resulted from a lower intercellular CO2 concentration (Ci) due to stomatal closure but the carboxylation efficiency was not affected as there was no difference in the initial slope of the A/Ci response after watering. Although there were no treatment differences in A at Ci below 270 μmol mol−1 (with ambient air at 360 μmol mol−1 CO2), higher electron transport rate (ETR), photochemical quenching (qP) and the efficiency of energy conversion of open PSII (Fv′/Fm′), and similar or even lower non-photochemical quenching (NPQ) were observed at a given Ci in drought-stressed plants (of both twice- and once-weekly irrigation), suggesting a higher fraction of open PSII resulting from energy dissipation achieved through higher electron flow rather than through thermal dissipation in PSII antennae. The once-weekly watered plants showed a lower ratio of gross carbon assimilation rate to ETR (A*/ETR), suggesting an enhanced alternative pathway of electron flow probably involving the Mehler-peroxidase (MP) reaction as indicated by a higher ΦPSII at a given ΦCO2 under non-photorespiratory conditions. On the other hand, plants of twice-weekly watering exhibited almost the same A*/ETR and ΦPSII–ΦCO2 relationship as control plants, indicating no enhanced alternative pathways under mild drought stress.