Ashwagandha, commonly known as the Indian Ginseng (Withania somnifera) is an ingredient in many herbal preparations used for healing various ailments. It is cultivated in semi-arid regions of India as rain-fed crop. The response of this crop (cv. JA-134) to progressive soil moisture deficit on growth, physiology and content of phytochemicals was studied. At the end of treatment period, soil water potential (Ψw) decreased to -10.93, -1.15 MPa at 30 cm depth, predawn leaf water potentials were reduced to -0.62 and -0.51 MPa in the severe and moderate stress. Leaf area was reduced by 27.4% and 34.4% in moderate and severe water stress treatment compared to control. Chlorophyll content was reduced by 60% in the severe water stress. Changes in the steroidal alkaloids and lactones that are the major medicinal active principles derived from root extracts of this plant species was also analyzed. A reduction of 52.6% in net photosynthesis was noticed under severe stress. At the end of the treatment period, moderate and severe stress treatments had 0.751 and 0.714 mg g-1 12-deoxywithastramonolide (12-DWS) content in the roots respectively. The content of 12-DWS and withanolide were at 77% and 93% of the control in the moderate and severe stress, respectively, while yield of these compounds were at 65% and 78% of control in mild and severe stress. Thus, preferential partitioning of biomass in roots leads to higher root yield in moderate stress. Higher root yield partially offset the loss of bioactive compounds under soil moisture stress.