Photochemical reflectance index (PRI) has been a promising method to estimate vegetation photosynthetic efficiency. However, the capability of canopy PRI in detecting environmental stress degrees and its underlying mechanism remains unclear, due to the strong confounding effects between soil background and canopy characteristics. This study aimed to explain how the canopy PRI responds to soil moisture and canopy characteristics under soil drying with their relative contributions and influencing pathways. A set of maize field experimental data with various drought treatments was applied to distinguish the roles played by soil moisture and canopy characteristics in determining the variations of seasonal canopy PRI. The results showed that PRI has the capability to capture canopy stress across growing season during soil drying. The mean canopy PRI across the entire growth period closely correlated with and RUE across varying drought treatments. Besides, the fraction of absorbed photosynthetic available radiation (fAPAR), canopy water content (CWC), and canopy chlorophyll content (CCC) were more related with PRI than leaf area index. The available soil water content (ASWC) was not directly linked to PRI but shared a positive linear relationship with PRI after eliminating the effects of canopy characteristics (including LAI, CCC, and CWC). Moreover, fAPAR and LAI were the most important direct and indirect factors affecting canopy PRI, respectively. The effect of CWC on canopy PRI was indirectly achieved by LAI and fAPAR. The results suggested that the confounding effects of LAI, CCC, and CWC on canopy PRI can be well presented by fAPAR. These findings imply that accounting for the fAPAR contribution is necessary to improve the accuracy for estimating photosynthetic efficiency and then monitoring crop stress through remote sensing.