The drought resistance of psammophytes determines their survival and growth under natural conditions or after transplanting. However, their responses to drought are not well understood. Agriophyllum squarrosum is a pioneer psammophyte in Horqin sandy land’s vegetation community, and Setaria viridis is the climax species. We conducted a pot experiment with both species to study how their physiological characteristics respond to drought and rehydration. We found that watering to 60 and 65% of field capacity (the control) provided more water than was required by A. squarrosum, and its leaves became yellow and slightly wilted. The total chlorophyll content and Fm (maximum fluorescence after dark adaptation) were lower than in the drought treatment, and both decreased after rehydration. With increasing drought duration, the chlorophyll content and Fm of A. squarrosum under moderate and severe drought first increased and then decreased, malondialdehyde levels and membrane permeability increased, but the quantum efficiency of photosystem II (Fv/Fm) decreased. With increasing drought duration and intensity, the relative water content (RWC), chlorophyll content, Fm, and Fv/Fm of S. viridis decreased, but malondialdehyde levels and membrane permeability increased. During the late drought period, levels of A. squarrosum’s three antioxidant enzymes increased to prevent membrane lipid peroxidation; for S. viridis, only peroxidase and superoxide dismutase levels increased. After rehydration, RWC of both plants increased, but the chlorophyll content decreased. Fv/Fm of A. squarrosum and Fm of S. viridis did not recover after severe drought. Our results provide insights into psammophyte adaptation to drought stress to support ecological restoration and reconstruction.