Drought reduces endogenous cytokinin (CK) content and disturbs plant water balance and photosynthesis. However, the effect of higher endogenous CK levels (achieved by suppressing cytokinin dehydrogenase (CKX) genes) on plant water status and photosynthesis under drought stress is unknown. Here, pot experiments were conducted with wild-type (WT) cotton (Gossypium hirsutum) and two GhCKX suppression lines (CR-3 and CR-13) to explore the effect of higher endogenous CK levels on leaf water utilization and photosynthesis under drought stress. The GhCKX suppression lines had higher leaf net photosynthetic rate (AN) and intrinsic water use efficiency (iWUE) than WT under drought. This increase was attributed to the decoupling of stomatal conductance (gs) and mesophyll conductance (gm) in the suppression lines in response to drought. GhCKX suppression increased gm but maintained gs relative to WT under drought, and the increased gm was associated with altered anatomical traits, including decreased cell wall thickness (Tcw) and increased surface area of chloroplast-facing intercellular airspaces per unit leaf area (Sc/S), as well as altered cell wall composition, especially decreased cellulose levels. This study provides evidence that increased endogenous CK levels can simultaneously enhance AN and iWUE in cotton under drought conditions and establishes a potential mechanism for this effect. These findings provide a potential strategy for breeding drought-tolerant crops or exploring alternative methods to promote crop drought tolerance.