Plant growth is often constrained by low availability of water and phosphorus (P) in soils in arid and semi-arid areas. Aeolian sandy soils cover >90% of the sandy area of the Mu Us Sandy Land (MUSL) in Northwest China. These soils have low water- and nutrient-retention capacity, limiting their ability to support plant growth. Pisha sandstone, a type of loose rock widely distributed in the MUSL, is regarded as an environmental hazard because it easily weathers, resulting in severe soil erosion and water loss. However, the retention capacity of the aeolian sandy soil can be significantly improved through blending with Pisha sandstone. We investigated the impacts of water supply (35% and 70% of soil water-holding capacity) and P supply (0, 5 and 20 mg P kg^–1 soil) on plant growth and P and nitrogen (N) nutrition by growing lucerne (Medicago sativa L.) in MUSL aeolian sandy soil amended or not with Pisha sandstone. Soil type and P supply had greater effects than water supply on lucerne growth and on P and N nutrition. Biomass accumulation and shoot P and N concentrations were increased by amending the aeolian sandy soil with Pisha sandstone and increasing P supply. The N : P ratios in shoots indicated that plant growth was limited by P but not by N. Aeolian sandy soil amended with Pisha sandstone and supplied with P at 5 mg kg^–1 enhanced lucerne growth; this practice is feasible for pasture development in the MUSL.