The present study documents critical analysis of drought-induced physiological responses in mulberry (Morus spp.) with insights into growth dynamics and leaf productivity. The study was performed for two years in a two-phase experimental design combining both field (experiment no. 1) and glasshouse (experiment no. 2) observations. In field assays, we surveyed 15 mulberry genotypes under two irrigation regimes: well-watered (20 to 24 irrigations in each growing season) and water-limited (irrigated once in a fortnight in each growing season). The genotypes were assessed for variation in key leaf gas exchange characteristics: net photosynthetic rates (Pn), stomatal conductance of CO2 (gs), transpiration rates (E) and instantaneous water use efficiency (WUEi). Leaf yield/plant was considered to determine the tolerance index (TI). Drought stress severely down-regulated leaf-level physiological variables in the susceptible genotypes resulting in poor leaf yield. However, genotypes S-13 and V-1 performed better in terms of leaf gas exchange and proved their superiority over other genotypes in drought tolerance. Conversely, genotypes DD and Bogurai were highly susceptible to drought. Under glasshouse conditions, the combined leaf gas exchange/chlorophyll a fluorescence measurements further dissected out stomatal and non-stomatal restrictions to Pn. As internal/ambient CO2 ratio (Ci/Ca) decreased concurrently with gs in non-irrigated stands, it appeared that greater stomatal limitation to Pn was associated with decreased photo-assimilation and leaf yield production. Further, higher leaf temperature (TL) (>35 °C) and down-regulation of maximum quantum yield of photosystem II (Fv/Fm) were apparent in the susceptible compared to the tolerant genotypes, which indicated chronic photoinhibition due to photo-inactivation of photosystem II centres in the susceptible genotypes. Drought-induced trade-offs in biomass allocation were also highlighted. Overall, our results suggest that greater rooting vigour and leaf hydration status, minimal stomatal inhibition and stabilized photochemistry might play major roles in maintaining higher Pn and associated gas exchange functions in drought-tolerant mulberry genotypes under water stress conditions. The higher leaf yield production in tolerant than susceptible genotypes can be attributed to minimal plasticity in foliar gas exchange traits and better quantitative growth characteristics under low water regimes.