Lotus corniculatus L. is a perennial forage legume species highly-adapted to growth under drought conditions. However, the genetic and physiological mechanisms involved in its adaptive capacity have not been elucidated. The role of osmotic adjustment (OA) and water-use efficiency (WUE) on the drought tolerance of L. corniculatus was studied in a greenhouse experiment. Seven cultivars of different origin were subjected to two contrasting treatments of available soil water: No water stress (NWS) and with water stress (WWS). Xylem water potential (Ψx), osmotic potential (Ψπ), pressure potential (Ψp), relative water content (RWC), stomatal conductance (g s), shoot DM production, water transpiration (T), and WUE (shoot DM/T) were measured. Water treatments significantly (P < 0.05) affected plant water status, which was reflected in reduced Ψx, RWC, g s, and transpiration rate in the WWS treatment compared with the NWS treatment. All cultivars showed a high capacity for OA under WWS treatment because Ψπ decreased by approximately 60% and Ψp increased by approximately 30%, compared with the NWS treatment. Cultivars with a higher solute accumulation (low Ψπ value) had the lowest DM production under WWS treatment. In contrast, WUE varied greatly among cultivars and was positively associated (R² = 0.88; P < 0.01) with DM production under drought conditions.