A long-term field experiment was conducted to quantify the effects of potassium chloride [muriate of potash (MOP)] fertilizer on the accumulation of chloride in the soil profile, plant water relations, fibre quality and yield of cotton (Gossypium hirsutum L.) in an arid environment. The trial lasted for eight years from 1994 to 2001 on the same experimental site at Central Cotton Research Institute, Multan-Pakistan. The site is located at latitude 30º 12׳ N, longitude 71º 12׳ E and altitude, 123 m. The soil is silt loam and belongs to Miani soil series and classified as Calcaric Cambisols and fine silty, mixed Hyperthermic Fluventic Haplocambids. The treatments consisted of four potassium (K) fertilizer doses (0, 62.5, 125.0, 250.0 kg K ha-1) and (ii) two K sources (potassium chloride and potassium sulphate). Cotton cultivar CIM-448 was used as a test crop. The results showed that application of K fertilizer in the form of MOP caused more than three-fold increase in raising the level of Cl- in the soil. Addition of 250 kg K ha-1 in the form of MOP raised the level of Cl- content to 11.79 me L-1 compared to 4.01 me L-1 under zero K rate treatment. Chloride ion leached down to lower horizons. The greater concentration of Cl- (11.79 me L-1) was found at lower depth (30-60 cm) compared to the lowest (6.10 me L-1) at the upper 0-30 cm depth under 250 kg K ha-1 (MOP) treatment. The application of MOP caused reduction in net photosynthetic rate (PN), transpiration rate (E), water-use efficiency (WUE), osmotic potential and turgor potential compared to K addition in the form of SOP. The application of SOP showed an edge over MOP in terms of production and retention of harvestable bolls, lengthening of fruiting branches and retention of a greater number of fruit on nodal positions along sympodia. The addition of K fertilizer in the form of MOP caused a decrease in fibre length (1%), fibre fineness (2.6%), and fibre elongation (2.2%) compared to application in the form of SOP. Potassium added as MOP caused a significant depression in seed cotton yield than that of SOP. Averaged across K doses, addition of K in the form of MOP caused 5 percent reduction in seed cotton yield compared to K applied as SOP. Keywords: Potassium nutrition; Chloride accumulation, Gas exchange characteristics, Seed cotton yield, Fruit retention. 1 Central Cotton Research Institute, Multan-Pakistan 2 Department of Botany, University of Agriculture, Faisalabad-Pakistan 3 Department of Chemistry, Bahauddin Zakariya University, Multan-Pakistan