While host plant drought is generally viewed as a negative phenomenon, its impact on insect herbivores can vary largely depending on the species involved and on the intensity of the drought. Extreme drought killing host plants can clearly reduce herbivore fitness, but the impact of moderate host plant water stress on insect herbivores can vary, and may even be beneficial. The populations of the Finnish Glanville fritillary butterfly (Melitaea cinxia) have faced reduced precipitation in recent years, with impacts even on population dynamics. Whether the negative effects of low precipitation are solely due to extreme desiccation killing the host plant or whether moderate drought reduces plant quality for the larvae remains unknown. We assessed the performance of larvae fed on moderately water-stressed Plantago lanceolata in terms of growth, survival, and immune response, and additionally were interested to assess whether the gut microbial composition of the larvae changed due to modification of the host plant. We found that larvae fed on water-stressed plants had increased growth, with no impact on survival, up-regulated the expression of one candidate immune gene (pelle), and had a more heterogeneous bacterial community and a shifted fungal community in the gut. Most of the measured traits showed considerable variation due to family structure. Our data suggest that in temperate regions moderate host plant water stress can positively shape resource acquisition of this specialized insect herbivore, potentially by increasing nutrient accessibility or concentration. Potentially, the better larval performance may be mediated by a shift of the microbiota on water-stressed plants, calling for further research especially on the understudied gut fungal community.