Water deficiency is a major abiotic stressor that negatively impacts plant growth, physiological functions, and internal biochemical processes. Aquilaria malaccensis (agarwood), globally recognized for its economic and medicinal value, was evaluated in this study to understand its response to drought stress. In this study, the seedlings were exposed to four irrigation treatments, regular irrigation (control) and water withholding for 7, 14, and 21 days, representing mild, moderate, and severe drought stress, respectively. Plant height and collar diameter were recorded at 3 and 6 months of the treatment, while other morphological, physiological, and biochemical parameters were measured after 6 months. At 3 months, drought stress showed no significant effect on height or collar diameter. However, at 6 months, moderate and severe stress significantly reduced plant height, leaf number, specific leaf area, and chlorophyll content. Relative Water Content (RWC) remained above the threshold under mild and moderate stress but declined sharply under severe stress. Root length was significantly affected by severe stress, while a higher root-to-shoot ratio under mild and moderate stress indicated root system adaptation to limited water availability. Stomata remained open in control and mildly stressed plants but mostly closed under moderate and severe stress, leading to reduced stomatal conductance and net photosynthetic rate. Biochemically, hydrogen peroxide (H₂O₂), malondialdehyde (MDA), and proline levels increased under moderate and severe stress, indicating oxidative stress and reduced membrane stability. In response, antioxidant enzymes (POD, CAT, GST, and APX) and secondary metabolites (total phenolics and flavonoids) were elevated, indicating activation of protective mechanisms. Overall, Aquilaria malaccensis exhibited moderate tolerance to short-term drought but was severely affected under prolonged drought stress, both morpho-physiologically and biochemically. Since no prior studies have been carried out on Aquilaria malaccensis under water deficit conditions, further research is required to better understand the effects of water stress.