The effect of long-term water stress on photosynthetic carbon metabolism in Casuarina equisetifolia Forst. & Forst. was analysed by measuring CO2 assimilation, stomatal conductance, the quantum yield of photosystem II (ΦPSII), enzyme activities, and the levels of photosynthetic intermediates and carbohydrates. CO2 assimilation decreased under water stress while the intercellular CO2 concentration (Ci) as estimated by gas exchange measurements remained high. However, the estimates of Ci from measurements of ΦPSII suggest that the decrease in photosynthesis can be explained in terms of stomatal closure. Water stress decreased total stromal fructose-1,6-bisphosphatase activity and did not alter the activities and activation states of ribulose bisphosphate carboxylase oxygenase and NADP-dependent malate dehydrogenase (NADP-MDH). The concentration of photosynthetic metabolites, glucose, fructose and sucrose decreased, whereas starch concentrations increased under drought conditions.