Seedlings of ponderosa pine (Pinus ponderosa Laws.) were grown for three years under three atmospheric ozone concentrations – clean air (CF), ambient ozone (NF), and 15 times ambient ozone (NF150)–at a moderately-polluted site in the Sierra Nevada, under either well-watered or drought-stressed conditions. When the trees were 5 years old, photosynthetic capacities of 2-year-old, 1-year-old, and current-year needles were measured during August and September of the 3rd season of exposure. Current-year needles of NF150 trees had higher photosynthetic capacity than NF and CF trees during late summer, an effect due to greatly enhanced photosynthesis in well-watered plants that had lost older needles as a result of ozone damage. This photosynthetic compensation in well-watered NF150 seedlings was related to higher tissue nitrogen concentration in the current-year foliage and possibly to increased inorganic phosphate cycling, both responses to the loss of older needles. Drought-stressed NF150 seedlings were partially protected from ozone damage by decreased stomatal conductance and did not exhibit the same degree of photosynthetic compensation. No differences in photosynthetic rate were found between CF and NF seedlings or between well-watered and drought-stressed seedlings (across ozone treatments) in any needle age class.