To study the effects of water stress on the fluorescence parameters and photosynthetic characteristics of rice under drip irrigation and mulching, so as to determine the response mechanisms to water stress during the tillering stage. A two-year trial was carried out at Shihezi University, China. Three water gradients were investigated. The results showed that the chlorophyll content (a + b), photosynthetic rate (Pn), and leaf area index (LAI) decreased with decreasing soil moisture content at the tillering stage. The chlorophyll content (a + b) and Pn in the flooding irrigation (CK) treatment were significantly higher than those in the stress treatments, and the chlorophyll content (a + b) and Pn in the W1 and W2 treatments were significantly lower than those in the other treatments. The maximum LAI of the CK, W1, and W2 treatments were similar, while the W3 produced lower values; stress treatment improved the ability of tillering in the early and middle stages, while the decrease in soil water content in the tillering stage resulted in a decrease in the final tillering rate; drought stress in the tillering stage resulted in decreased rice yields. The yield of the W1 and W2 treatments were similar, while that of the W3 treatment was seriously reduced. The main reasons for the reduction in yield was the significant decrease in the number of effective panicles, the seed setting rate, and a decrease in the 1000-grains weight. Water consumption in the stress treatments decreased by 51.69%–58.78% compared to the CK treatment; water-use efficiency in the CK treatment was only 0.25 kg·m−3, and the water-use efficiency of the stress treatments increased by 40%–72%. We should make full use of the compensation effect of drought stress in the water regulation of drip irrigation in covered rice and adopt the water control measure of the W2 treatment in the tillering stage. These measures are conducive to improving water-use efficiency and achieving the goal of high quality, high yield, and high efficiency.