This study assessed the photosynthesis, biomass, and phytoenergy production in sugarcane plants subjected to water deficit during the initial stages of development. We hypothesize that the limitations imposed by water deficit on photosynthesis proportionally affect carbon balance, growth, and partitioning of phytoenergy in sugarcane. This study was carried out during 5 months in a growth chamber and water deficit was induced by maintaining soil moisture at 20 % of the maximum water holding capacity (WHC). As control, one group of plants was maintained at 100 % WHC. Water deficit reduced the carboxylation of Rubisco and PEPCase significantly, which were the main limiting factors for photosynthesis. As consequence, the daily leaf carbon balance was significantly reduced by drought. The total accumulated dry matter in well-watered plants was 3.6 times higher than in drought-stressed ones. Water deficit reduced the energy accumulated in sugarcane plants by approximately threefold. Regardless of water regime, a large fraction of the converted energy was not found in stalks. Under water deficit, less than 20 % of the energy is stored in stalks. Since only a tiny fraction of solar energy is used for the production of first generation ethanol, our study reinforces the importance of evaluating strategies to optimize the use of sugarcane, for example, harvesting plant organs other than stalks.378