The effects of NaCl (200 mM) and osmotic stress generated by polyethylene glycol (PEG) on PSII maximal quantum efficiency, photosynthetic CO2/H2O gas exchange at two CO2 concentrations, content of chlorophyll, proline, and malondialdehyde were investigated in shoots of C4 xerohalophyte Haloxylon aphyllum (Chenopodiaceae). The PEG treatment induced a low water osmotic potential (–0.4 MPa) and inhibited photosynthesis (by a factor of 2) and transpiration (by a factor of 4). The NaCl treatment, at equal osmoticity conditions, reduced transpiration (by a factor of 2) and stimulated photosynthesis (by a factor of 2.5). Only the PEG-treated plants showed osmotic stress effects, which were demonstrated by an increase in proline and malondialdehyde contents in the shoot tissue. The data indicated that the halophilic character of this species was essential for maintaining the plant water status and photosynthesis under osmoticity induced by NaCl treatment. Herewith, the presence of C4-type photosynthesis appeared to be just an auxiliary mechanism, because this xerohalophyte did not reveal the efficiency in water use typical for C4 plants under osmotic stress, in the absence of a saline substrate.