Cotton (Gossypium spp.), which is of tropical origin, is the most economically important textile fiber crop worldwide. Water and nitrogen are two major factors that limit the photosynthetic capacity and yield of cotton. The ability to absorb water and nutrients is closely related to the size and growing space of the root system. In Xinjiang province cotton is often cultivated at a high plant density with under-mulch drip irrigation, a method that saves both water and fertilizer application. In addition, the growing space of the root system is suppressed to a certain degree. The aim of this study was to evaluate the effects of nitrogen and water supply on photosynthesis and yield of cotton with a restricted root space grown with under-mulch drip irrigation. An improved understanding of the physiological mechanisms by which cotton acclimates to water, nitrogen supply and root restriction will be useful to improve the yield potential of cotton cultivated using this method. The experiment was conducted in Xinjiang in northwestern China from March to October, 2011. Two upland cotton cultivars, Xinluzao13 and Xinluzao 33, were selected as the plant material. Plants of both cultivars were grown in soil columns to restrict the depth of the root system and regulate the supply of water and nitrogen. We measured net photosynthetic rate (P_n), stomatal conductance (G_s), maximum photochemical efficiency (F_v/F_m), photochemical efficiency of PSⅡ (ΦPSⅡ), PSⅡ photochemical quenching (q_p), and the biomass of various organs at different growth stages. Under the same water and nitrogen supply from the flowering stage to the full boll opening stage, the values of q_p, G_s, and P_n of root-restricted cotton plants were significantly lower compared with those of the control. This effect was greater at later growth stages. No differences in F_v/F_m and ΦPSⅡ were observed between root-restricted and control plants. The root weight of root-restricted plants at the full flowering stage and full boll opening stage was lower than that of the control. However, the dry matter accumulation in the shoot and boll and the seed cotton yield were greater in root-restricted plants than those of the control. From the flowering stage to the full boll opening stage, P_n, G_s, F_v/F_m, ΦPSⅡ, and q_p of plants with the same root system volume but treated with different rates of water and nitrogen supply were ranked in the following order: W₁N₁ (moderate water and nitrogen) > W₀N₁ (water deficiency) > W₁N₀ (nitrogen deficiency) > W₀N₀ (water and nitrogen deficiency). At the full flowering and full boll opening stages, the dry matter accumulation in the shoot and boll of root-restricted plants supplied with moderate water and nitrogen was significantly greater than that in the other treatments. Consequently, the boll number per plant, single boll weight, and seed cotton yield were markedly higher in this treatment than in the other treatments. The root system of plants grown with under-mulch drip irrigation is confined to a limited space. Therefore, effective methods to promote the yield of cotton cultivated with under-mulch drip irrigation include optimization of water and nitrogen supply at all growth stages. Moderate supply of water and nitrogen can strengthen photosynthetic ability, increase dry matter accumulation in the shoot, and increase the photosynthate distribution from shoot biomass to reproductive organs. In practice, given the small drip volume but high frequency of application to cotton plants grown with under-mulch drip irrigation, it is likely that the most effective approach to save water and increase yield simultaneously is to increase plant density and adjust the inter-and intra-row spacing among plants in order to moderately limit root growth.