We hypothesized that plant growth reduction under water stress is caused primarily by a reduction of leaf-area ratio (LAR, leaf area per unit of total plant dry mass). Two perennial Chihuahuan desert grass species (slow-growing Bouteloua eriopoda and fast-growing Eragrostis lehmanniana) were subjected over 6 wk to a combination of two water-supply regimes (control and drought) and two levels of atmospheric CO2 partial pressure (375 and 750 mumol mol(-1)). Drought reduced final biomass in Bouteloua by 60% regardless of CO2 concentration. Eragrostis experienced a similar biomass reduction at 375 mumol mol(-1), but large plants under elevated CO2 attained growth rates comparable to those of controls. Overall, for plants of similar size, drought reduced LAR in both species much more strongly than it affected net assimilation rate. This reduction in LAR was caused by reductions in both specific leaf area and leaf weight ratio. We conclude that reduced growth under drought can be considered as a byproduct of the same plastic, developmental responses that result in a reduced water loss.