Biofilms exist in a variety of habitats that are routinely or periodically not saturated with water, and residents must integrate cues on water abundance (matric stress) or osmolarity (solute stress) into lifestyle strategies. Here we examine this hypothesis by assessing the extent to which alginate production by Pseudomonas putida strain mt-2 and by other fluorescent pseudomonads occurs in response to water limitations and how the presence of alginate in turn influences biofilm development and stress tolerance. Total exopolysaccharide (EPS) and alginate production increased with increasing matric, but not solute, stress severity, and alginate was a significant component, but not the major component, of EPS. Alginate influenced biofilm architecture, resulting in biofilms that were taller, covered less surface area, and had a thicker EPS layer at the air interface than those formed by an mt-2 algD mutant under water-limiting conditions, properties that could contribute to less evaporative water loss. We examined this possibility and show that alginate reduces the extent of water loss from biofilm residents by using a biosensor to quantify the water potential of individual cells and by measuring the extent of dehydration-mediated changes in fatty acid composition following a matric or solute stress shock. Alginate deficiency decreased survival of desiccation not only by P. putida but also by Pseudomonas aeruginosa PAO1 and Pseudomonas syringae pv. syringae B728a. Our findings suggest that in response to water-limiting conditions, pseudomonads produce alginate, which influences biofilm development and EPS physiochemical properties. Collectively these responses may facilitate the maintenance of a hydrated microenvironment, protecting residents from desiccation stress and increasing survival.