Compost can increase soil water availability and nutrient uptake by plants, but it is not clear whether it can also improve the ability of plants to recover after drought stress. Tomato plants (Lycopersicon esculentum L.) were grown in sandy soil without compost or with compost either incorporated or mulched. There were two water treatments: (i) plants grown under sufficient water supply throughout the experiment and (ii) plants grown with sufficient water supply until day 33 after which water was withheld until stomatal conductance was close to zero. Compost addition increased water content at both field capacity and permanent wilting point, but only incorporated compost increased total available water. Compost addition increased shoot and root growth under well-watered and drought stressed conditions with a greater effect by incorporated compost. At sufficient water supply, the rates of photosynthesis and transpiration were similar in all treatments. Drought stressed plants with incorporated compost wilted earlier than control plants, whereas mulched compost increased water availability to plants and hence the number of days until wilting. Photosynthesis and transpiration recovered faster in plants grown with incorporated compost compared to other treatments. The rapid recovery of plants after drought with incorporated compost could be due to their greater root length.