Water scarcity is a common phenomenon in arid and semi-arid regions, which could have tremendous effects on livestock production. This study aimed to determine the level of water restriction that lambs fed on a pelleted diet can tolerate without compromising their production performance. A total of 24 male Najdi lambs were housed individually and randomly allocated into three equal groups, namely ad libitum water intake, 33% water-intake restriction, and 67% water-intake restriction. Dry-matter intake, feed conversion ratio, and average daily gain were decreased (p p p p p p < 0.05) efficiency of nitrogen utilization. It was strongly evident that lambs could tolerate water-intake restriction of up to 33% without compromising their production performance.