Fast increase in world population, scarcer water resources and climate change are putting pressure on the maximization of crop yield, while optimizing the use of water and soil. Salinity causes tremendous yield losses at world scale, especially in dry areas. We revise the current understanding of the impact of drought and salinity on photosynthesis, a highly sensitive process to these stresses and a major determinant of plant's growth and yield. The CO2 diffusive limitations (stomatal and mesophyll) to photosynthesis under water deficits and the underlying regulatory mechanisms of stomatal behaviour and photosynthetic metabolism are presented. Recent molecular advances are described, in particular those related to stomatal development and guard cell signalling. Special emphasis is given to the effects of ABA signalling on stomatal regulation under water deficits. The role of transcription factors controlling guard cell movement and photosynthetic activity under drought and high salinity is discussed. Coordination of stomata] conductance with the CO2 requirements of leaf mesophyll that may allow constant water use efficiency (WUE) in different environments is analysed on the basis of recent data from transformed plants. The improvement of WUE by optimizing Rubisco carboxylase capability to increase photosynthetic efficiency has been ineffective. Therefore, we stress the importance of knowledge on leaf gas-exchange limitations caused by drought and high salinity for future breeding strategies. The direct transfer of the knowledge gathered from model plants into crops needs to be carefully considered.