Drought and low amounts of organic matter are two main constraints when considering agriculture in arid and semiarid regions. The two constraints and their adverse effects on soils and plants may be alleviated by biochar (B). Therefore, this study aimed to evaluate the influence of 0 (0B), 1.25 (1.25B), 2.5 (2.5B) and 5% wt (5B) cattle-manure biochar on the agronomic and physiological traits of soybean under field capacity (FC), 0.7FC and 0.55FC conditions. Drought was observed to reduce water use efficiency (WUE), leaf area, stomatal conductance (SC), harvest index (only for 0.55FC), straw fresh matter yield (SFMY), straw dry matter yield (SDMY), pod yield, grain yield, pod lenght, and plant height by nearly 15–16%, 23–36%, 23–47%, 11–12%, 42–64%, 36–52%, 44–65%, 41–64%, 5–11%, and 33–60%, respectively as compared with those of control (FC conditions), whereas drought increased the greenness index (GI) of soybean leaves by 11–20% compared with control. In general, drought decreased all traits of studied soybean variety. However, pod yield, grain number, SFMY and plant height were more negatively influenced. The most unfavorable effect of drought on SC was observed at the late reproductive stage (90 days after planting, DAP); whereas, drought effects on leaf area were similar at different growth stages. Harvest index (HI) and WUE was the lowest at severe drought (0.55FC) and there was no significant difference between these traits at non-drought (FC) and moderate drought (0.7FC) conditions. Therefore, keeping soil moisture to near 0.7FC not only did not change the WUE and HI, but also reduces water consumption. All B treatments increased the leaf area (at the beginning, 60 DAP and middle reproductive stages, 75 DAP), GI and SC by 6–36%, 11–20%, and 46–80%, respectively. The application of 1.25B increased WUE, SFMY, SDMY, the pod length and plant height by 26%, 35%, 27%, 5%, and 16%, respectively, whereas higher percentages of B were ineffective, i.e. 2.5B did not significantly affect the WUE, SDMY and pod length and 5B reduced the values of the grain and pod yield and 1000-grain weight. Low level of biochar (1.25B) had positive influences on almost all traits; whereas, higher levels (2.5B and 5B) due to the excessive salinity not only had no positive effects but also adversely influenced almost all traits. Furthermore, positive effects of the effective biochar treatment (1.25B) on almost all traits were most pronounced at the moderate or severe drought conditions compared with non-drought conditions. In conclusion, high levels of B due to salinity related negative influences on plant cannot be suggested. While, application of 1.25B due to mitigating the adverse effects of drought and consequently increasing WUE, the growth and yield components of soybean may be recommended.