Few studies have investigated the influence of water availability on plant population spatial patterns. We studied changes in the spatial patterns of Caragana stenophylla along a climatic drought gradient within the Inner Mongolian Plateau, China. We examined spatial patterns, seed density, "nurse effects" of shrubs on seedlings, transpiration rates and water use efficiency (WUE) of C. stenophylla across semi-arid, arid, and intensively arid zones. Our results showed that patches of C. stenophylla populations shifted from a random to a clumped spatial pattern towards drier environments. Seed density and seedling survival rate of C. stenophylla decreased from the semi-arid zone to the intensively arid zone. Across the three zones, there were more C. stenophylla seeds and seedlings underneath shrub canopies than outside shrub canopies; and in the intensively arid zone, there were almost no seeds or seedlings outside shrub canopies. Transpiration rates of outer-canopy leaves and WUE of both outer-canopy and inner-canopy leaves increased from the semi-arid zone to the intensively arid zone. In the intensively arid zone, transpiration rates and WUE of inner-canopy leaves were significantly lower and higher, respectively, than those of outer-canopy leaves. We conclude that, as drought stress increased, seed density decreased, seed proportions inside shrubs increased, and "nurse effects" of shrubs on seedlings became more important. These factors, combined with water-saving characteristics associated with clumped spatial patterns, are likely driving the changes in C. stenophylla spatial patterns.