The dominant seagrass in Florida Bay, Thalassia testudinum Banks ex Konig, is a stenohaline species with optimum growth around marine salinity (30–40PSU). Previous studies have examined the responses of mature short shoots of T. testudinum to environmental stresses. Our goal was to assess responses of seedlings to changes in water chemistry in Florida Bay that might occur as part of the Comprehensive Everglades Restoration Plan (CERP). Specifically, we examined seedling survival, growth, photosynthesis, respiration and osmolality in response to hypo- and hyper-salinity conditions, as well as possible synergistic effects of depleted and elevated ammonium concentrations. The study was conducted in mesocosms on T. testudinum seedlings collected during August 2003 near Florida Bay. Hyper- and hypo-saline conditions were detrimental to the fitness of T. testudinum seedlings. Plants at 0 and 70PSU exhibited 100% mortality and a significant decrease in survival was observed in the 10, 50 and 60PSU treatments. Increased levels of ammonium further decreased growth in the lower salinity treatments. Seedlings in 30 and 40PSU had the greatest growth. Quantum yield and relative electron transport rate, measured using PAM fluorometry, showed a decrease in photosynthetic performance on either side of the 30–40PSU optimum. Tissue osmolality decreased significantly with decreased salinity but tissue remained consistently hyperosmotic to the media across all salinity treatments. Maintaining negative water potential and allocating more energy to osmoregulation may decrease the productivity of this species in salinity–stress conditions. Our results suggest that the salinity-tolerance limits of this seagrass at the seedling stage are not as broad as those reported for mature plants. Increased fresh water inflow, especially if co-occurring with an increase in water-column ammonium, could negatively affect successful recruitment of T. testudinum seedlings in northern regions of Florida Bay.