Lack of water is especially detrimental to plants because they end up closing their stomata to conserve water. Healthy plants take in carbon dioxide through their stomata. However, at the same time, open stomata means that a little bit of water vapor (water in the form of gas) also escapes through them. Now, if there's not enough liquid water to absorb, plants will close their stomata in order to prevent more water vapor from escaping. This means that plants also don't take up as much carbon dioxide as they need. Therefore, photosynthetic activity slows down.

On the other hand, too much water can also negatively affect plants. Their roots needs access to oxygen as well, but when there's too much water, the roots are 'clogged' and can't 'breathe'. They could also rot from sitting in a pool of water for too long. Lack of oxygen is a vital component of photosynthesis, so you can see that too much water is not good either.