Intercropping and increased planting density are important agronomic strategies to alleviate the conflict between grain and cotton production and to improve land use efficiency. Cotton-peanut intercropping can enhance the land equivalent ratio (LER), and appropriate planting density is critical for achieving high yields. However, the effects of increased density on the photosynthetic characteristics and yield of intercropped cotton in the arid region of southern Xinjiang remains unclear. To address this issue, a field experiment was conducted in southern Xinjiang during 2024-2025 using a split-plot design. The main plots included planting patterns: monocropped cotton (MC), cotton-peanut intercropping IC, and monocropped peanut (MP), while subplots consisted of three planting density (D1: 180, 000 plants & centerdot;ha-& sup1;, D2: 240, 000 plants & centerdot;ha-& sup1;, D3: 300, 000 plants & centerdot;ha-& sup1;). The study systematically investigated the effects of planting density and pattern on cotton photosynthetic characteristics, chlorophyll fluorescence parameters, dry matter accumulation, and yield. The results showed that: (1)The net photosynthetic rate (Pn), transpiration rate (Tr), and stomatal conductance (Gs) initially increased and then decreased during the growth period, with peak values observed at the flowering and boll-setting stage. Under intercropping conditions, the ICD2 treatment exhibited the highest Pn, Gs, and Tr at this stage. In both 2024 and 2025, intercropped cotton under D2 showed 10.1% and 15.6% higher Gs and15.9% and 21.3% higher Fv/Fm, respectively, compared with monocropped cotton at the flowering and boll-setting stage. (2) Dry matter accumulation in all treatments followed a logistic growth model. The onset of rapid accumulation (T1) generally occured earlier in intercropping than in monocropping systems, with ICD3 occurring 10.3 days earlier than MCD3. The ICD2 treatment achieved the highest total dry matter accumulation, exceeding MCD1 by 20.0% in 2024. (3) Cotton yield under monocropping decreased with increasing planting density, whereas under intercropping, yield first increased and then declined, with ICD2 producing the highest seed cotton yield. The land equivalent ratio reached 1.21. (4) Yield was significantly positively correlated with Pn and Fv/Fm at the flowering and boll-setting stages. Principal component analysis further indicated that ICD2 exhibited the best overall performance. In conclusion, cotton-peanut intercropping at a planting density of 240, 000 plants & centerdot;ha-1 (D2) effectively improve cotton photosynthetic capacity, enhances PSII energy conversion efficiency, promotes dry matter accumulation, and increases yield. These findings provide a theoretical basis for optimizing cotton production in the arid regions of southern Xinjiang.