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Water shortage is one of the major challenges faced by the current agricultural systems worldwide, especially in arid and semi-arid regions. Deficit irrigation (DI), a water-saving strategy of applying less water than crop evapotranspiration (ETc) demands, has been extensively investigated in different crops, including water-intensive vegetables. The DI strategies such as regulated deficit irrigation (RDI) and partial root zone drying (PRD) generally increase water use efficiency (WUE) and have emerged as potential practices to save water for agricultural sustainability. However, in view of the sensitivity of shallow-rooted vegetable crops to water stress, DI is often associated with yield losses. A review of 134 DI reports of vegetable crops revealed significant reductions in yield under all DI levels in 52% of cases and yields statistically similar to those of full irrigation (100% ETc in most cases) under small water deficits in 44% of cases, thereby raising concerns about the sustainability of vegetable production under DI. Biochar, a carbon-rich co-product of pyrolysis of organic matter, is increasingly undergoing study as a soil amendment to mitigate drought stress and is being explored as an additional practice with DI to minimize the yield losses due to water deficits. This work reviews the effects of biochar application on growth, yield, physiology, and WUE of different vegetable crops under DI regimes to determine the potential of biochar and DI used in combination to sustain vegetable productivity in water-limited areas. Overall, the addition of biochar under DI has helped to compensate for yield losses of vegetables and further enhanced WUE. However, field studies investigating long-term soil–biochar interactions that strongly conclude the impact of biochar under moisture stress conditions are lacking.