•Plant density alters leaf nitrogen allocation to photosynthetic apparatus and nitrogen partitioning among photosynthetic components.•Cotton optimized photosynthetic nitrogen use efficiency and photosynthetic capacity by adjusting leaf mass per area.•Appropriate spatial distributions of leaf N allocation to the photosynthetic apparatus and photosynthetic use efficiency of photosynthetic N contribute to efficient utilization of light and nitrogen. Plant population density (PPD) is an important practice for optimizing canopy structure and improving canopy photosynthetic capacity of field-grown cotton (Gossypium hirsutum L.). A 2-yr field experiment was conducted to determine if and how PPD (7.5, 19.5 or 31.5 plants m−2) affects the light-saturated photosynthetic rate and photosynthetic nitrogen use efficiency in cotton leaves, with a focus on the key canopy characteristics for efficient utilization of light and nitrogen. The results showed that leaf N allocation and partitioning among different components of the photosynthetic apparatus were significantly affected by PPD. As PPD changed, cotton optimized photosynthetic N use efficiency and photosynthetic capacity by adjusting leaf mass per area, which in turn affected leaf N allocation to the photosynthetic apparatus. In the upper canopy layer, leaf N allocation to the photosynthetic apparatus increased as PPD increased, resulting in an increase in leaf photosynthetic N use efficiency. In contrast, in the mid- and lower-canopy layers, leaf N allocation to the photosynthetic apparatus decreased as PPD increased, resulting in declines in leaf light-saturated photosynthetic rate and photosynthetic N use efficiency. The overall results indicated that high photosynthetic capacity of leaves in the upper-canopy layer and high leaf N allocation to the photosynthetic apparatus and photosynthetic use efficiency of photosynthetic nitrogen in the mid- and lower-canopy layers were two key canopy characteristics for efficient utilization of light and nitrogen by cotton. The medium-PPD is the optimum plant density due to high light utilization efficiency, superior spatial distribution of leaf N allocation to the photosynthetic apparatus and photosynthetic use efficiency of photosynthetic N in leaves within the canopy.