We investigated the effects of PSARK∷IPT (for Senescence-Associated Receptor Kinase∷Isopentenyltransferase) expression and cytokinin production on several aspects of photosynthesis in transgenic tobacco (Nicotiana tabacum cv SR1) plants grown under optimal or restricted (30% of optimal) watering regimes. There were no significant differences in stomatal conductance between leaves from wild-type and transgenic PSARK-IPT plants grown under optimal or restricted watering. On the other hand, there was a significant reduction in the maximum rate of electron transport as well as the use of triose-phosphates only in wild-type plants during growth under restricted watering, indicating a biochemical control of photosynthesis during growth under water deficit. During water deficit conditions, the transgenic plants displayed an increase in catalase inside peroxisomes, maintained a physical association among chloroplasts, peroxisomes, and mitochondria, and increased the CO2 compensation point, indicating the cytokinin-mediated occurrence of photorespiration in the transgenic plants. The contribution of photorespiration to the tolerance of transgenic plants to water deficit was also supported by the increase in transcripts coding for enzymes involved in the conversion of glycolate to ribulose-1,5-bisphosphate. Moreover, the increase in transcripts indicated a cytokinin-induced elevation in photorespiration, suggesting the contribution of photorespiration in the protection of photosynthetic processes and its beneficial role during water stress.