Water stress and nitrogen (N) availability are the main constraints on barley (Hordeum vulgare L.) yield in Mediterranean conditions. Here we studied the combined effects of N source and water regime (WR) on plant growth, photosynthesis and carbon isotope discrimination (Δ13C) in barley grown under controlled conditions. The effects of these conditions on plant N isotope discrimination against the fertiliser (Δ15N) was also examined to assess whether the natural variation in plant N isotope composition is a reliable indicator of N nutrition. Six experimental treatments were established with three nutrient solutions containing ammonium (NH4+), nitrate (NO3-) or a mixture of the two (NH4+ : NO3-), each either well watered or moderately water stressed. The NH4+ : NO3- treatment resulted in the greatest biomass accumulation and photosynthetic capacity in both WRs. The NH4+ plants showed accelerated phenology and depressed growth. They also had the lowest photosynthetic rates in both WRs. This effect was mainly due to stomatal closure, while electron transport and carboxylation capacity of leaves were less affected. Consistent with lower stomatal conductance, leaf Δ13C was lower in plants that received NH4+, indicating higher water use efficiency (WUE) not only when irrigated, but also under water stress. In addition, leaf Δ13C and photosynthetic N use efficiency (PNUE) correlated positively with each other and with shoot biomass in both WRs. However, NO3- treatment produced the greatest Δ15N, which was higher in leaves than in roots. Leaf Δ15N was decreased by water stress only in plants in the NO3- treatment. We conclude that leaf Δ13C is an adequate trait to assess the differences in growth, photosynthetic activity and WUE caused by distinct N sources. However, the usefulness of natural abundance of 15N in plant tissue as a nitrogen source marker is restricted by the effect of WR and internal plant fractionation, at least for plants that received NO3-.