Based on biomass composition of plants collected from saline habitats, Phragmites karka (Retz.) Trin. ex Steud. has emerged as a suitable feedstock for biofuel. In the present study, plant growth, eco-physiological responses and bioenergy characteristics of P. karka grown under conditions ranging from non-saline to ∼80% seawater salinity are reported. Moderate salinity (NaCl at 100 mol m^–3) increased plant fresh weight (20%), number of leaves (25%) and specific plant length, which were directly linked with increased net photosynthetic rate (25%) and stomatal conductance (25%) compared with the non-saline control. Higher photosynthetic efficiency was achieved by increasing electron transport rate (ETR, 20%), effective quantum yield (YII, 21%) and maximum efficiency of photosystem II (Fv/Fm, 20%). Decreased non-photochemical quenching (Y(NPQ)) and malondialdehyde content (18%) indicated an oxidative balance, which was also reflected in total carotenoids and chlorophylls. These eco-physiological parameters worked together to increase cellulose (34%) and hemicellulose (70%) at NaCl concentrations up to 200 mol m^–3. Decreased growth under higher salinity could be linked with photosynthesis inhibition, due to stomatal closure and co-occurring reduction in CO₂ uptake. Lower stomatal conductance increased water-use efficiency but led to over-production of reactive oxygen species, which disturbed oxidative stability (increasing ETR/P_N) and imposed membrane leakage. Consequently, plants accumulated more carotenoids and soluble carbohydrates to stabilise PSII machinery (Fv/Fm, YII and Y(NPQ)), and to survive under high salinity. Such adaptations, however, led to growth penalty and reduced quality of lignocellulosic biomass. The above findings suggest that P. karka qualifies as a suitable raw material for biofuel under moderate salinity.