To determine the effects of Myco-Root biofertilizer and different irrigation levels on the content and essential oil compounds of thyme (Thymus daenensis Celak.), a factorial experiment was conducted in a completely randomized design with eight treatments and three replications in the greenhouse of Plant Production and Genetics department, Faculty of Agriculture, University of Maragheh, Iran, in 2020. The factors included drought stress at four levels of without stress (irrigation at field capacity (FC) as a control), mild (irrigation at 75% FC), moderate (irrigation at 55% FC), and severe (irrigation at 35% FC) stresses and biofertilizer at two levels of inoculation and non-inoculation with Myco-Root. The results demonstrated that the fresh and dry weight of leaves, stem dry weight, total dry weight, leaf relative water content, chlorophylls a and b and total chlorophyll content, and root colonization percentage decreased significantly with increasing the water deficit level. However, the carotenoid content and essential oil percentage showed an increasing trend with increasing drought stress. The highest carotenoid content and essential oil percentage was obtained by using Myco-Root under moderate drought stress. Thymol, carvacrol, p -cymene, 1,8-cineole, (E)-caryophyllene, borneol, γ-terpinene, and α-pinene were identified as the major constituents of essential oil in the all treatments. The highest content of thymol was obtained under mild drought stress with the Myco-Root application. Furthermore, the highest content of carvacrol was recorded under mild, moderate, and severe drought stresses, respectively with the Myco-Root application. On average, the application of Myco-Root biofertilizer increased the content of thymol, carvacrol, 1,8-cineole, E-caryophyllene, borneol, and α-pinene by 4.19, 48.28, 15.93, 16.33, 14.15, and 3.78%, respectively compared to not using this biofertilizer. Overall, the results showed that some morphological and physiological traits of thyme decreased significantly with increasing the water deficit levels, but the application of Myco-Root biofertilizer could amend drought stress and improve the growth, percentage and essential oil quality of the plant. Thus, the use of Myco-Root biofertilizer instead of chemical fertilizers could be recommended to achieve the sustainable agriculture in the thyme cultivation.