Plants grown in an environment of elevated CO2 and temperature often show reduced CO2 assimilation capacity, providing evidence of photosynthetic downregulation. The aim of this study was to analyse the downregulation of photosynthesis in elevated CO2 (700 µmol mol−1) in nodulated alfalfa plants grown at different temperatures (ambient and ambient + 4°C) and water availability regimes in temperature gradient tunnels. When the measurements were taken in growth conditions, a combination of elevated CO2 and temperature enhanced the photosynthetic rate; however, when they were carried out at the same CO2 concentration (350 and 700 µmol mol−1), elevated CO2 induced photosynthetic downregulation, regardless of temperature and drought. Intercellular CO2 concentration measurements revealed that photosynthetic acclimation could not be accounted for by stomatal limitations. Downregulation of plants grown in elevated CO2 was a consequence of decreased carboxylation efficiency as a result of reduced rubisco activity and protein content; in plants grown at ambient temperature, downregulation was also induced by decreased quantum efficiency. The decrease in rubisco activity was associated with carbohydrate accumulation and depleted nitrogen availability. The root nodules were not sufficiently effective to balance the source–sink relation in elevated CO2 treatments and to provide the required nitrogen to counteract photosynthetic acclimation.