In the context of contemporary climate change, drought is widely recognized as a major stressor affecting plant growth. While numerous studies have demonstrated that Serendipita indica enhances stress resistance in host plants and is widely used in agriculture, research on its symbiotic interactions with woody plants for improving drought tolerance remains limited. This study investigated the effects of S. indica inoculation on the growth of Phoebe sheareri seedlings under varying drought conditions—well-watered (WW), moderate drought (MD), and severe drought (SD)—and explored the physiological mechanisms underlying improved drought resistance. The results showed that under WW conditions, S. indica inoculation promoted seedling growth and development. Under MD and SD conditions, although drought stress inhibited growth, inoculation significantly increased plant biomass, root parameters, chlorophyll content, and photosynthetic efficiency. Additionally, it alleviated drought-induced damage by reducing REC, MDA, H₂O₂, and O₂⁻ levels, while enhancing SOD, POD, and CAT activities, and increasing root ABA, GA, IAA, and CTK content. Under MD stress, adaptive changes in root architecture and hormone levels were observed, including increases in total root length, surface area, volume, average diameter, and elevated IAA and CTK levels—all of which were further enhanced by S. indica inoculation. In conclusion, symbiosis with S. indica improved drought tolerance in P. sheareri seedlings likely through enhanced photosynthesis, antioxidant enzyme activity, and hormone regulation.