Abstract: Populus euphratica Oliv. is a precious woody plant in arid regions with vital ecological functions such as high tolerance to salinity/alkalinity, high drought resistance, wind-break/sand-fixation, etc. Because of human socio-economic activities and the resulting development of water resources in recent years, a large number of P. euphratica decayed. Current studies on P. euphratica have focused on changes in physiological and biochemical characteristics, changes in dominant P. euphratica community characteristics, vitro morphogenesis development and histological trend observations. However, there have been little studies on the anatomy and hydraulic characteristics of xylem stems under drought stress. Analysis of changes in the anatomy and hydraulic characteristics of P. euphratica stem xylem under drought stress was significant for interpreting its resistance mechanism. This water control experiment analyzed the response of the anatomy and hydraulic characteristics of P. euphratica stem xylem to different degrees of drought stress. Results showed that with increasing drought stress, the xylem vessel density significantly decreased (P < 0.01). Also xylem vessel diameter, wall thickness and wall mechanical strength increased significantly (P < 0.01). The large the vessels diameter, the more water transported. Also thicker and harder vessel walls ensured secure water relay. Perforation and pit diameters also significantly increased (P < 0.05) with increasing drought stress, resulting in more efficient axial and radial water relay. However, no observable changes were noted in vessel micro-morphology. There were two types of vessel ― pitted vessel and spiral vessel. Most of the pits were bordered pits with alternate arrangement. Spiral thickening was noted at end walls of vessel. All perforations were of the single type, probably due to common natural growth and long-term evolution. For hydraulic characteristics, conductivity (Ks) and native embolism level (PLC) significant increased (P < 0.05) with increasing drought stress. To effectively adapt to arid environments, it was concluded that changes in anatomy and hydraulic characteristics of P. euphratica stem xylem were active growth processes. To a certain extent, these activities compensated for the negative effects of drought stress on P. euphratica.