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Abstract: Restoration of degraded arid and semi‐arid land faces the challenge of reinstating vegetation communities exposed to limited and variable rainfall events that in combination with a deficit of original topsoil may exceed thresholds for seedling development. In a series of glasshouse experiments, we evaluated variation in drought responses of (i) 21 arid zone plant species from the mining intensive Pilbara region of Western Australia in an original topsoil substrate and (ii) four selected species (Acacia inaequilatera, Acacia spondylophylla, Eucalyptus leucophloia and Triodia epactia) in three different soil substrates (topsoil, overburden material and a blend of both soil materials) that may be considered as an alternative substrate for restoration. Seedling drought responses were tested using ecophysiological indicators (e.g. stomatal conductance and leaf water potential (Ψleaf) at the time of stomatal closure, among others) during soil drying. Our results showed that plant life form and morphological traits interact with ecophysiological indicators to show that trees are significantly less tolerant to drought‐related stress than shrubs and herbs (p ≤ 0·05). When grown in overburden material seedlings experienced a decline in overall plant growth (87% in T. epactia and 62% in E. leucophloia) and ecophysiological drought tolerance. These responses are evidence of the low quality of the overburden substrate, which has a depleted nutrient content and low water retention capacity. Overall, this study highlights the sensitivity of early seedling development and the importance of facilitating seedling recruitment and survival to secure successful arid zone restoration. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]