The combined influence of cadmium (Cd) and drought was evaluated on in vitro regenerated plants of banana ‘Grand Nain’ at morpho-physiological and molecular levels. A significant reduction was observed due to separate or combined treatments of Cd and polyethylene glycol (PEG) in total chlorophyll, carotenoid content, and all growth parameters except root length, which was increased under Cd treatment. Meanwhile, other traits were increased significantly under combined treatment of Cd and PEG (1 and 3%), including malondialdehyde, phenolic content, and peroxidase specific activity. Furthermore, molecular analysis using the inter-simple sequence repeats (ISSR) markers confirmed the harmful effect of Cd. Cadmium caused DNA damage reflected by 18.4% polymorphism compared to the control. Out of 14 polymorphic bands, 12 were absent due to Cd treatment and two bands existed only in Cd-treated samples compared with control. However, the addition of PEG was efficient to reduce the harmful effect of Cd on DNA profile. In this regard, 1% PEG reduced the number of polymorphic bands produced by Cd to the half, while 3% PEG was enough to give an equal DNA profile to that of control with no polymorphic bands. In addition, there was no effect of the separate PEG treatments on ISSR pattern compared with control. Results confirmed the mutagenicity and toxicity of Cd on banana. The effect of PEG-induced drought reduced the damaging effects of Cd by minimizing its uptake and accumulation in plant tissues.