The morphological and physiological responses of two contrasting Populus cathayana Rehd. populations to three light regimes, full sunlight (control), 33% full sunlight (moderate shade), and 12% full sunlight (severe shade), were investigated under well-watered and drought conditions. The populations were from Hanyuan (relatively more annual rainfall and less annual solar radiation) and Ledu (less annual rainfall and more annual solar radiation) in western China. In both populations, drought-treated plants exhibited reduced growth, leaf relative water content, net photosynthesis, and maximal efficiency of photosystem II (PSII); increased levels of chlorophyll, carotenoid, abscisic acid, and carbon isotope composition; and a greater accumulation of malondialdehyde (MDA) than did well-watered plants. There was an apparent alleviation of drought effects by moderate shade, especially in the Hanyuan population, as indicated by the higher leaf relative water content, net photosynthesis, stomatal conductance, and maximal efficiency of PSII and the lower MDA content.On the other hand, an apparent aggravation of drought effects by severe shade was also observed, especially in the Ledu population, as indicated by the lower total biomass and net photosynthesis and the higher MDA content. Moreover, the Hanyuan population was more shade tolerant and drought sensitive than the Ledu population.