This study aimed to evaluate the role of drought-induced changes on effects of cadmium (Cd) in plants. Cd is most hazardous and important environmental pollutant. Water deficit is most common environmental stress encountered by plants and affects most of the plant functions. The present study assessed the effect of Cd and water deficit on Capsicum frutescens seedlings in single and combined treatments. The seedlings of Capsicum were grown in hydroponic solution and treated with Cd. The seedlings were subjected to water deficit with help of polyethylene glycol (PEG). The other set of seedlings was treated with combined Cd + PEG. In the absence of PEG maximum Cd accumulation were observed. The root and shoot growth of the seedlings were affected under all treatments with maximum inhibition in Cd. Pigment, protein and sugar contents and nitrate reductase activity decreased significantly in all treatments while proline content increased. Induction of oxidative damage occurred through the formation of free radicals which caused alteration in electrolyte leakage, lipid peroxidation and activities of antioxidant enzymes viz. superoxide dismutase, catalase, ascorbate peroxidase, guaiacol peroxidase and non enzymatic non-protein thiol content and ascorbic acid in the stressed seedlings. Water deficit buttressed the toxic effect of Cd on chilli seedlings.