Some fungal species have been shown to improve plant growth under drought conditions and to increase plant phosphorus (P) uptake from the soil. How moisture limitation, P availability and fungal inoculation interact to affect plant physiology and growth is, however, poorly understood. Here, we studied the combined effects of fungal (arbuscular mycorrhizal fungi (AMF) or Penicillium spp.) inoculations and phosphorus (P) fertilization (0, 45 and 90 kg ha−1) on the net rate of photosynthesis, water‐use efficiency, P uptake and growth of spring wheat (Triticum aestivum var. Superb) under field conditions at two locations (Castor and Vegreville) in Alberta, Canada. Both fungal inoculation and P application increased the rate of photosynthesis. Under the same P level, AMF inoculation had a greater positive effect on the rate of photosynthesis than Penicillium inoculation. The AMF inoculation increased the instantaneous water‐use efficiency (WUEi) of plants at Castor, but not at Vegreville. Leaf carbon isotope discrimination (CID, Δ13C) increased with the rate of P application but was not affected by fungal inoculations. Phosphorus concentrations of stem and seed increased with both fungal inoculation and P application irrespective of location, with AMF inoculation showing the largest effects. The interaction between P addition and fungal inoculation was significant for stem P concentration in Vegreville. Both fungal inoculation and P application increased the leaf area index (LAI), biomass production and grain yield at both locations. Under the same P level, AMF inoculation had a greater positive effect on LAI, biomass production and grain yields than Penicillium inoculation. Morphological characters such as spike length and kernels/spike were also improved by fungal inoculation and P application at both locations. We conclude that the studied sites were deficient in P availability, and both fungal inoculation and P application improved P uptake and crop productivity, while the effect of fungal inoculation on water‐use efficiency was site specific.