Soil desiccation is increasingly threatening the growth of vegetation in artificial forests at the margins of arid desert oases, where a variety of annual herbaceous plants coexist. It is important to understand the response of annual desert plants to droughts and mixed growth and the resulting patterns of change in photosynthetic and physiological properties. Our results showed that annual plants were primarily affected by drought stress, and the effect of interspecific competition was significant only under severe drought stress. In the sprouting stage, moderate drought increased seed germination rates, whereas severe drought stress decreased the germination rates. In the growth phase, the aboveground and belowground parts of annual herbaceous plants showed a synergistic response to drought. Under mild and moderate drought stress, annual herbaceous plants promoted photosynthesis by increasing chlorophyll content, thereby promoting plant stem growth. Following moderate and high drought, root vigor increased to maintain basic metabolic activities and annual herbaceous plants used the “shadow and avoid” response by increasing stem and root length to increase competitive ability. Under severe drought stress, planted seedling chlorophyll levels decreased, resulting in a simultaneous reduction in photosynthetic ability. The root growth of annual herbaceous plants depends on their photosynthesis ability but the decrease in biomass led to a decrease in root growth. The mixed habitat reduced the inhibition of seedling stem growth by drought stress and promoted plant growth.