An underlying mechanism for reductions in crop yield under stress conditions is excessive production of reactive oxygen species (ROS) that can damage lipids, nucleic acids, and proteins, leading to disruption of physiological processes. The aim of this study was to determine whether overexpression of the gene for a peroxisomal antioxidant enzyme, ascorbate peroxidase 3 (APX3), could provide protection of photosynthesis during drought when the potential rises for excessive photorespiratory H2O2 production. Tobacco (Nicotiana tabacum L.) plants were transformed to constitutively overexpress the Arabidopsis thaliana gene for APX3. Following repeated water-deficit cycles, fruit number and seed mass of transgenic plants were significantly higher than those of control plants. In another experiment, water deficit was developed gradually by reducing, in stages, the extent to which water lost was replenished. Genotypic differences in gas-exchange parameters were observed at the 25% replenishment stage and at 5 h after severely stressed plants were rewatered. At these times, transgenic plants exhibited greater rates of CO2 assimilation (A), stomatal conductance (gs), and internal CO2 (Ci) to atmospheric CO2 (Ca) concentration than control plants, suggesting that differences in A were controlled by differences in gs. Although these data did not support the idea that overexpression of the gene for APX3 enhances protection of the photosynthetic apparatus during water deficit, overexpression of APX3 may affect other cellular metabolisms that result in higher A under moderate water-deficit conditions and therefore higher seed mass after repeated water-deficit treatments.