Candidate species for reforestation of areas prone to drought must combine water stress (WS) tolerance and economic or medicinal interest. Melia azedarach produces high quality timber and has insecticidal and medicinal properties. However, the impact of WS on M. azedarach has not yet been studied. Two-month old M. azedarach plants were exposed to WS during 20 days. After this period, plant’s growth, water potential, photosynthetic performance and antioxidant capacity were evaluated. WS did not affect plants’ growth, but induced stomatal closure, reduced net CO2 assimilation rate (A) and the intercellular CO2 availability in mesophyll (Ci). WS also reduced the photosynthetic efficiency of PSII but not the pigment levels. WS up-regulated the antioxidant enzymes and stimulated the production of antioxidant metabolites, preventing lipid peroxidation. Therefore, despite some repression of photosynthetic parameters by WS, they did not compromise plant growth, and plants increased their antioxidant capacity. Our data demonstrate that M. azedarach juvenile plants have the potential to acclimate to water shortage conditions, opening new perspectives to the use of this species in reforestation/afforestation programs of drought prone areas.