Plant growth-promoting rhizobacteria (PGPR) have gained increasing attention for their potential to enhance nitrogen (N) acquisition efficiency and alleviate biotic and abiotic stress. We conducted a two-stage experiment to investigate, firstly, synergistic effects of combining the plant growth-promoting rhizobacterium, Paraburkholderia sp. SOS3, with either urea (iN) or a combination of urea with poultry manure-based fertiliser (iNoN) on seedling growth of Leptospermum polygalifolium (Myrtaceae) over 133 days. This was followed, secondly, by a water-deficit trial over 14 days to test whether SOS3 inoculation and N fertilisation influenced water stress tolerance. We studied plant growth, plant N uptake, medium physicochemical properties, whole-plant cumulative transpiration (Tp), transpiration efficiency (TEp) and carbon isotope discrimination (CID). Seedlings fertilised with iNoN had an over 5-fold increase in total biomass and 6-fold increase in N uptake compared with seedlings fertilised with iN, and this response was not affected by SOS3 inoculation. Inoculation with SOS3 significantly impacted water stress responses in water-stressed plants, with a reduction of 2–18% in Tp and an increase of 4–8% in CID, although TEp was not affected by inoculation. Our results suggest that L. polygalifolium can acquire combinations of inorganic and organic N more efficiently than inorganic N alone and highlight that Paraburkholderia sp. SOS3 may reduce water use under water deficit conditions through shifts in gas exchange.