Halophytes that are capable of tolerating a wide range of salinity may grow best at intermediate salinities, but the physiological mechanisms underlying positive growth responses to salinity are not clear. This work investigated the growth of Arthrocnemum macrostachyum (Moric) C. Koch (a halophytic C3 shrub) over a wide range of salinities, and the extent to which its responses can be explained by photosynthetic physiology. Growth, gas exchange and chlorophyll fluorescence characteristics of plants were examined in a glasshouse experiment; tissue concentrations of photosynthetic pigments, ash, sodium, potassium, calcium and nitrogen were also determined. Plants showed marked stimulation of growth by salt, with a broad optimum of 171–510 mm NaCl for relative growth rate (RGR). Stimulation of RGR appeared to depend mainly on an increase in specific shoot area, whereas reduced RGR at high salinity (1030 mm) could be attributed to a combination of lower unit shoot (leaf) rate and lower shoot mass fraction. The non-saline treatment plants had the greatest fraction of non-photosynthetic, atrophied surface area. However, net photosynthesis (A) was also stimulated by NaCl, with an optimum of c. 510 mm NaCl. The responses of A to salinity could be accounted for largely by limitation by stomatal conductance (Gs) and intercellular CO2 concentration (Ci). Even the most hypersaline treatment apparently had no effect on photosystem II (PSII) function, and this resistance could be an important strategy for this halophyte in saline soils. In contrast, Fv/Fm indicated that absence of salt represents an environmental stress for A. macrostachyum and this could be a contributory factor to salt stimulation of A. Notwithstanding the importance of the ability to develop and maintain assimilatory surface area under saline conditions, stimulatory effects on A also appear to be part of a suite of halophytic adaptations in this plant.