Abstract. A field experiment was conducted during 1993-1995 to study the effect of industrial effluent on the initial growth of Azadirachta indica A. Juss. (Neem) in arid region. The effluent released from textile industry had high pH, EC, SAR and RSC. Various treatments were: irrigation with effluent only (W 1 ), effluent mixed with canal water at 1:1 ratio (W 2 ), gypsum-treated effluent (W 3 ), gypsum-treated soil (W 4 ) and wood ash-treated soil (W 5 ). W 5 was the best treatment where neem attained 218 cm height, 118 cm crown diameter and 11.2 cm collar circumference at 28 months of age; followed by W 1 treatment, where trees were on an average 186 cm tall and had 104 cm crown diameter and 9.4 cm collar circumference. Growth of the seedlings was the poorest in W 2 treatment. Increase in biomass accumulation over W 2 treatment (1.89 kg tree -1 ) was 3.6 fold in W 5 , 2.1 fold in W 1 , 2.0 fold in W 4 and 1.4 fold in W 3 treatments. Though effluent application increased soil organic matter, electrical conductivity and in some cases pH also, but gypsum-and wood ash-treated soil ameliorated the pH by 0.25 units in comparison to the initial data. These results suggest that industrial wastewater can be effectively used to boost up establishment and growth of Neem (Azadirachta indica) in arid zone. Addition of wood ash improves the rate of growth. Irrigation with industrial effluent caused slight increase in electrical conductivity and decline in the soil pH.