Mexican elder (Sambucus mexicana Presl.) is used in arid landscapes of the Southwest, but the plant is known for its unpredictable performance in those landscapes. We studied drought responses of mexican elder plants grown in an arid environment using an in-ground nursery production system. Plants were maintained as well-irrigated controls or exposed to cyclic drought and irrigated based on evapotranspiration. Drought treatment lasted 165 days. Plants exposed to drought had more negative predawn and midday water potentials than well-watered plants. The ratio of variable to maximal fluorescence (Fv/Fm) for the drought group (0.76), was near the optimum value of 0.8, suggesting that chloroplasts of drought-stressed plants maintained high levels of activity. Drought cycle, but not drought treatment affected stomatal conductance. Drought-stressed plants had lower transpiration rates than controls except at drought cycle five when transpiration rates were similar between irrigation treatments. Relative water content was higher in controls (76%) than plants exposed to drought (66%). Leaf area of well-irrigated plants was over four times higher than that of plants exposed to drought. Leaf area to root dry weight ratio of drought-stressed plants was 79% lower than control plants. Severely reduced leaf area of drought-stressed plants might be one reason why landscape personnel conclude that mexican elder plants perform poorly in arid landscapes.