Tephrosia apollinea (Leguminosae) is a desert legume shrub from UAE deserts and can fix atmospheric nitrogen through Rhizobium symbiosis. Uniform seedlings of T. apollinea were hydroponically grown in beakers (100 ml) covered with sink strainers in a growth chamber and subjected to different levels of polyethylene glycol (PEG) (0%, 5%, 10%, and 15%) treatment. Potential PEG-induced osmotic stress was evaluated through several plasticity traits such as plant biomass, root nodulation and viability of nodules, and stable isotopes of carbon (δ13C) and nitrogen (δ15N). Osmotic stress decreased plant fresh (FW) and dry biomass (DW), with the largest reduction being found at 15% PEG. Osmotic stress significantly decreased δ13C in both roots and leaves, but the reduction was more prominent in the roots. Conversely, osmotic stress significantly increased δ15N in both roots and leaves. We identified four different strains of nitrogen fixing bacteria (Rhizobium leguminosarum, R. radiobacter, R. meliloti and Bradyrhizobium sp.) from root nodules forming a symbiotic association with T. apollinea. The overall results indicate that carbon allocation, root nodule activity, and carbon and nitrogen isotope signatures are useful functional attributes to measure in relation to adaptive survival of T. apollinea in arid deserts. In addition, the combination of ecophysiological and morphological plasticity in T. apollinea suggest it as an interesting biomass source and nurse plant in nutrient-poor soils of desert environments.