Abstract: Photosynthates, the products as the source for plant dry matter accumulation, have a direct effect on plant growth and the formation of yield and grain quality. Soil water content and nitrogen concentration are the main factors which influence plant growth and dry matter accumulation. The study of grapevine photosynthetic characteristics, fruit quality and yield in desert oasis area, is of important significance for wine grape industry development. A field experiment was conducted during the wine grape growing season in Wuwei, China in 2010. The wine grape (Merlot) was planted in 1999 with 2 nitrogen fertilizerand 3 soil water content levels. The nitrogen treatments were HN (high nitrogen, 170 kg/ha) and LN (low nitrogen, 130 kg/ha), and the water treatments were CK ( 70% of the field capacity), M (55% of the field capacity) and L ( 40% of the field capacity). The diurnal dynamics of leaf photosynthetic rate was measured at sunny days during berry growth period (July 27th) and berry expansion period (August 26th) using a Li6400 portable photosynthesis system, and the net photosynthetic rate (Pn), transpiration rate (Tr), stomatal conductance (Gs) and leaf water use efficiency (WUE) were read and calculated. Meanwhile, the total soluble solid content and grape yield were also measured. The meteorological parameters (solar radiation (Ra), air temperature (Ta), relative humidity (RH)) were recorded for the whole grape growing period. The results showed that the diurnal cycles of leaf net photosynthetic rate and transpiration rate appeared a "M" type under different water and nitrogen conditions, with an more obvious photosynthetic rate depression as soil water content decreasing. The lower soil water content would cause the decrease of stomatal conductance, transpiration rate and photosynthetic rate. The severe water deficit significantly reduced the leaf water use efficiency, and the moderate water deficit would improve the water use efficiency of wine grape. High nitrogen application could increase the stomatal conductance, transpiration rate and leaf photosynthetic capacity, so the plant drought resistance ability was enhanced and the water use efficiency was improved. The leaf water use efficiency was highest in the high nitrogen and moderate water deficit treatments. Under nitrogen deficiency conditions, moderate and severe water deficit would be increased the total soluble solid content by 6.9% and 13.9%, while the yield was decreased by 32.2% and 49.9%, respectively. And under sufficient nitrogen conditions, the berries soluble solid content of moderate and severe water deficit treatments were increased by 7.5% and 16.2% compared to the control, respectively, but no significant decrease of grape yield was observed. This research is meaningful for the understanding of water and fertilizer coupling of desert oasis area grape, providing a theoretical base for the wine grape water and nitrogen management in this area.