The effects of drip irrigation with saline water at five different concentrations (0, 0.125, 0.25, 0.5 and 1% NaCl) and three different irrigation levels (100, 75 and 50%, of Class A Pan evaporation between irrigations) on plant growth, gas exchanges and yield were investigated in field-grown pepper plants (Capsicum annuum L cv. Laser). Both salinity and water stress limited plant gas exchanges and reduced growth, and increased the concentrations of Na+ and Cl- ions in the plant's vegetative and reproductive tissues. However the effects of salinity stress were mostly apparent at higher salinity levels (0.5 and 1% NaCl), regardless of irrigation levels. For example, salt effects on net assimilation rates were greater than on plant transpiration rate, which resulted in lower water use efficiencies in plants irrigated with water containing high concentrations of salt (greater than or equal to 0.5% NaCl). Furthermore, yield (quantified as individual fruit weights and number of fruit per plant) was only significantly reduced by salinity stress when concentrations were greater than 0.25% NaCl and soil electrical conductivities were less than 4 dS m(-1) in the root zone. Limited amounts of saline irrigation water can be used for growing peppers for commercial production, even when less than optimal levels of water are applied.