The effect of arbuscular-mycorrhizal (AM) fungus Glomus fasciculatum on growth and N form assimilation was measured on onion ( Allium cepa) grown under well-watered (−0.04 MPa) or drought conditions (−0.17 MPa). Two uninoculated control treatments, one provided with phosphate, were also addressed. These three treatments were supplemented with 2.0 mM nitrogen as nitrate and ammonium in a 1/1 ratio. Shoots and root weights, percentage of root colonized and glutamine synthetase (GS) (EC 6.3.1.2.) and nitrate reductase (NR) (EC 1.6.6.1) activity in shoot and root tissue were determined when water was maintained at (−0.04 MPa) or (−0.17 MPa) in the growth medium. The growth of G. fasciculatum-colonized plants was comparable to that of uncolonized P-supplemented plants under well-watered or drought conditions but mycorrhizal plants reached a higher specific and total GS activity in shoots and roots than P-fertilized plants growth at −0.04 MPa. The mycorrhizal effect on GS activity under water stress (−0.17 mPa) was evident only in roots being comparable to that found in P-fertilized plants. The proportion of GS in roots was increased in AM plants under whatever soil water conditions. The most marked increasing effect of AM-colonization on NR activity was in root tissue. Under water limitations the effectiveness of G. fasciculatum increasing NR activity in plant was enhanced. The proportion of nitrate assimilation into root was increased in AM plants particularly under well-watered conditions. Mycorrhizal modifications in the GS and NR distribution into root and shoot compartments may account for some physiological effect from mycorrhizal colonization. These results are further evidence of a direct effect on absorption, translocation and assimilation of both N forms by the endomycorrhizal system. That mycorrhizal plants can utilize nitrate form more efficiently than ammonium under drought conditions is consistent with more recent studies on the AM effect on N uptake from a neutral-alkaline soil. Results here presented suggest that either AM fungi increase the nitrogen forms assimilation in the host plant (regardless of P content) or the AM fungi have such enzymatic activities per se. This last assumption is supported by the relative high increase of NR and GS activities found in the roots of mycorrhizal plants. Nevertheless while NR was maintained increased in mycorrhizal roots under water stress the GS activity was not affected. This suggests the AM ability to provide an active nitrate acquisition in particular in water stressed environment. The different proportion of nitrate and ammonium assimilation into shoot and root compartments may account to modify physiological mycorrhizal responses related to plant sensitivity to drought.