We hypothesised that improved plant water status and enhanced transpiration are key mechanisms involved in plant growth stimulation by native arbuscular mycorrhizal fungi (AMF) in semiarid calcareous soils. Seedlings of the dryland shrubs Pistacia lentiscus L. and Retama sphaerocarpa L. were pre-inoculated with a mixture of eight native Glomus spp. fungi, or left un-inoculated, before transplanting into a degraded site in south-eastern Spain. Pre-inoculated Pistacia and Retama shrubs grew faster after transplanting, despite spontaneous colonisation of control plants by local AMF. Pre-inoculation enhanced shoot water content and shoot δ¹⁵N in both shrub species. Increased potassium uptake and improved water relations were key mechanisms behind growth stimulation by native AMF in Pistacia. Shoot δ¹⁸O (a proxy measure of stomatal conductance) was significantly less negative in AMF-inoculated than in control Pistacia seedlings, indicating enhanced cumulative transpiration in the former. In contrast, shoot δ¹⁸O was unaffected by AMF inoculation in Retama, a leafless leguminous shrub with photosynthetic stems. Growth stimulation by native AMF in Retama was attributed to increased phosphorus uptake, enhanced atmospheric nitrogen fixation and a largely nutrient-mediated improvement of plant water status. Shoot δ¹³C was not significantly influenced by AMF inoculation in either shrub species, thus suggesting roughly parallel upshifts in photosynthetic and transpiration rates which did not affect plant water use efficiency.