Drought is the most serious abiotic stress, which significantly reduces crop productivity. The phytohormone ABA plays a pivotal role in regulating stomatal closing upon drought stress. Here, we characterized the physiological function of AtBBD1, which has bifunctional nuclease activity, on drought stress. We found that AtBBD1 localized to the nucleus and cytoplasm, and was expressed strongly in trichomes and stomatal guard cells of leaves, based on promoter:GUS constructs. Expression analyses revealed that and are induced early and strongly by ABA and drought, and that is also strongly responsive to JA. We then compared phenotypes of two -overexpression lines ( -OX), single knockout , and double knockout plants under drought conditions. We did not observe any phenotypic difference among them under normal growth conditions, while OX lines had greatly enhanced drought tolerance, lower transpirational water loss, and higher proline content than the WT and KOs. Moreover, by measuring seed germination rate and the stomatal aperture after ABA treatment, we found that -OX and plants showed significantly higher and lower ABA-sensitivity, respectively, than the WT. RNA sequencing analysis of -OX and plants under PEG-induced drought stress showed that overexpression of enhances the expression of key regulatory genes in the ABA-mediated drought signaling cascade, particularly by inducing genes related to ABA biosynthesis, downstream transcription factors, and other regulatory proteins, conferring -OXs with drought tolerance. Taken together, we suggest that AtBBD1 functions as a novel positive regulator of drought responses by enhancing the expression of ABA- and drought stress-responsive genes as well as by increasing proline content.