Chitosan, being one of the most promising biological macromolecules, has an immense scope in agriculture to boost crop growth and defense responses. In this study, chitosan was exposed to gamma rays in order to obtain a low molecular weight derivative. Viscometric characterization showed a sharp decrease in molecular weight and FTIR based analysis confirmed retention of structural integrity of the polymer upon gamma irradiation. Assessments of various physiological and biochemical attributes were carried out on sugarcane plantlets that were subjected to progressive water deficit stress. The irradiated chitosan was found to differentially ameliorate water deficit stress tolerance against that of normal chitosan through positive modulation of various gas exchange parameters alongside significant improvement in relative tissue water content, SOD activity, soluble sugars and adenine energetics. Furthermore, application of irradiated chitosan significantly reduced cell membrane damage, lipid peroxidation, HO and free-proline accumulations. This is the first report on the use of gamma irradiated chitosan to alleviate water deficit stress tolerance in sugarcane. Overall comparative assessments showed that differential plant responses were triggered upon foliar application of normal and gamma irradiated chitosan in sugarcane plants grown under water deficit stress conditions.