Severe water stress conditions limit growth and development of floricultural crops which affects flower quality. Hence, development of effective approaches for drought tolerance is crucial to limit recurring water deficit challenges. Foliar application of various plant growth regulators has been evaluated to improve drought tolerance in different floricultural crops; however, reports regarding the role of chitosan (Ci) on seasonal flowers like calendula are still scant. Therefore, we evaluated the role of Ci foliar application on morphological, physiological, biochemical, and anatomical parameters of calendula under water stress conditions. Different doses of Ci (0, 2.5, 5, 7.5, 10 mg L−1) were applied through foliar application to evaluate their impact in enhancing growth and photosynthetic pigments of calendula. The optimized Ci level of 7.5 mg L−1 was further evaluated to study mechanisms of water stress tolerance in calendula. Ci application significantly increased biomass and pigments in calendula. Ci (7.5 mg L−1) resulted in increased photosynthetic rate (72.98%), transpiration rate (62.11%), stomatal conductance (59.54%), sub-stomatal conductance (20.62%), and water use efficiency (84.93%). Furthermore, it improved catalase, guaiacol peroxidase, and superoxide dismutase by 56.70%, 64.94%, and 32.41%, respectively. These results highlighted the significance of Ci in inducing drought tolerance in pot marigold.