Water deficit is one of the major limiting factors in vegetation recovery and reconstruction in loess hilly region in semi-arid area. Hippophae rhamnoides Linn. is one of the common trees grown in this region. However, the mechanisms for the decline of photosynthesis in leaves of Hippophae rhamnoides Linn. under water stress are not very clear. The objective of this study is to investigate the processes and mechanisms of drought stress on photosynthesis and the relationship between photosynthesis and soil water content, which will help us to further understand the photosynthetic characteristics of Hippophae rhamnoides Linn. under water stress and to guide cultivation in the loess hilly region. The gas exchange, chlorophyll fluorescence and antioxidant enzyme activities in leaves of three-year-old Hippophae rhamnoides Linn. grown in pots were tested under 8 different soil water treatments. The results showed that: (1) When relative soil water content (RWC) was 70.5%, the net photosynthetic rate (P_n) was maximal. When RWC was between 38.9% and 70.5%, P_n, stomatal conductance (G_s) and intercellular CO₂ concentration (C_i) significantly decreased with increasing drought stress, meanwhile, stomatal limitation (L_s) significantly increased, indicating that stomatal limitation was responsible for reduction in P_n. When RWC was lower than 38.9%, P_n and L_s decreased and C_i increased with increasing drought stress, showing that the main reason for restricting P_n had turn into non-stomatal limitation. Turning point of RWC from stomatal to non-stomatal limitation was 38.9% for leaf photosynthesis. (2) Moderate water stress can improve the water use efficiency (WUE). When RWC was between 58.6% and 82.9%, P_n was maintained at a high level, and when RWC was between 48.3% and 70.5%, the WUE was maintained high. (3) The maximal fluorescence (F_m), maximal photochemical efficiency(F_v/F_m) of PSII, actual photochemical efficiency (Φ_PSⅡ) and photochemical quenching (qP) all showed declining trends under continuous drought stress, while minimal fluorescence (F_o) increased significantly, non photochemical quenching (NPQ) increased and then decreased. When RWC was between 38.9% and 70.5%, thermal energy dissipation was the significant photoprotective mechanism. And RWC lower than 38.9% caused the inhibition of photosynthetic electron transport and damage of PSII. (4) The activities of superoxide dismutase (SOD), peroxidase (POD) and catalase (CAT) increased and then decreased with the deepening of drought stress, while malondialdehyde (MDA) contents increased continuously. These showed that the activities of the antioxidant enzyme were activated in the region where SWC were from 48.3% to 70.5%. Under severe water stress (RWC<38.9%), the antioxidant enzyme system was damaged, the activities of the antioxidant enzymes declined and cell membrane was destroyed. These results implied that: the function of photosynthetic apparatus in Hippophae rhamnoides Linn. seedling leaves was maintained by a synergistic effect of thermal energy dissipation and regulating the antioxidant enzymatic activity jointly in the region where SWC were from 48.3% to 70.5%, and the decreased P_n were mainly due to stomatal limitations through stomatal regulation. Major non-stomatal limitation responsible for reduction in P_n was associated with the impairment of PSⅡ and antioxidant enzyme system under severe water stress (RWC<38.9%). RWC 38.9% was the soil water maximum deficit level allowed in the semiarid loess hilly region for Hippophae rhamnoides Linn., and RWC from 58.6% to 70.5% was economy water threshold value maintaining the largest WUE and the higher P_n.