Growth and physiological differences in response to drought were compared between two sea buckthorn (Hippophae rhamnoides L.) populations inhabited in the southeast of the Qinghai-Tibetan Plateau of China. The experimental design included two water regimes (100% and 25% of field capacity) and two populations from the low and high altitude zone. Our experiments were conducted in a naturally lit greenhouse under semi-controlled environmental conditions for a whole growing season in a dry valley (1800 m above the sea level). We found that drought tolerance is highly related to the plant antioxidant capacity and water use efficiency as well as leaf nutrient status in H. rhamnoides. The highland population (HP) experienced a greater inhibition in plant growth and leaf enlargement, lower leaf nitrogen and phosphorus content, lower root nodule biomass and root mass/foliage area ratio, and higher leaf water content loss paralleling with higher enhancement of abscisic acid level in response to drought, as compared with lowland population (LP). Additionally, reduction of leaf lignin content in HP further reduced its drought tolerance. On the contrary, LP showed effective adaptation strategies such as improvement of water economy and maintaining high ascorbic acid content. Therefore, we conclude that LP was more tolerant to drought than HP, and could be selected for reforestation in the dry valleys of upper Minjiang River regions in China.