To compare the effect of arbuscular mycorrhiza (AM) and P-supplement on N uptake and N assimilation under well-watered or drought-stressed conditions, Glomus intraradices-colonised, P-supplemented non-mycorrhizal (P) and non-mycorrhizal (control) plants of Lolium perenne were exposed to 12 days of water treatment. Leaf water potential (Ψ (w)), photosynthetic ability, and N and P nutritional status were measured at the beginning (day 0) and end (day 12) of water treatment. N absorption, amino acid and protein synthesis were quantified using the isotopic tracer (15)N at day 12. Under well-watered conditions, growth response and physiological parameters were similar in AM and P plants, as compared to controls. Drought (10% water) significantly decreased these parameters in all three treatments. As compared to control plants, the negative impact of water deficit on the Ψ (w), photosynthesis, biomass, and N and P content was highly alleviated in AM plants, while only slightly improved or remained the same level in P plants. The effect of AM symbiosis on N absorption and N assimilation was greater than that of the P supplement under well-watered and drought-stressed conditions, and this effect was highly enhanced under drought-stressed conditions. At terminal drought stress on day 12, the effect of AM colonisation on de novo synthesis of amino acids and proteins was 4.4- and 4.8-fold higher than that of the P supplement. These results indicate that the AM symbiosis plays an integrative role in N nutrition by alleviating the negative impacts of drought on N or P uptake and N assimilation, whereas the efficiency of a direct P supplement is very limited under drought-stressed conditions.