The present study deals with the isolation and characterization of Azospirillum strains isolated from roots and rhizosphere soil of wheat (at tillering and anthesis stages) plants grown under different moisture regimes in the field and in pots. The survival of Azospirillum isolates from plants of irrigated field and those from well-watered pots was higher than that of Azospirillum strains isolated from roots and rhizosphere soils of plants grown under arid and semiarid (14–8% soil moisture) field conditions and under water-stressed (8% soil moisture) conditions in pots. On the basis of carbon/nitrogen source utilization, the Azospirillum strains isolated from wheat under field and pot conditions were grouped in three groups. The unweighted pair group method with arithmetic means cluster analysis based on random amplification of polymorphic DNA showed that two groups of Azospirillum were similar. The strains isolated from plants (at tillering stage) grown under low moisture conditions either in pots or in field were genetically similar to strains isolated from plants grown under well-watered conditions in both pots and field. Inoculation of wheat with isolates from water-stressed plants induced tolerance to water stress in inoculated plants. Isolates from water-stressed conditions exhibited lower production of indole acetic acid, gibberellic acid, and trans zeatin riboside but a higher production of abscisic acid.