Molecular mechanisms of osmotic stress tolerance were studied in Mesembryanthemum crystallinum (ice plant), a facultative halophyte capable of adjusting to and surviving in highly saline conditions. We screened a subtracted cDNA library enriched for salt stress-induced mRNAs to identify transcripts involved in this plant's adaptation to salinity. One mRNA, Imt1, was found to be up-regulated in leaves and, transiently, in roots. Nuclear run-on assays indicated that this mRNA is transcriptionally regulated. Imt1 encoded a predicted polypeptide of M(r) 40,250 which exhibited sequence similarity to several hydroxymethyl transferases. Expression of the protein in Escherichia coli and subsequent activity assays identified the protein as a novel myoinositol O-methyl transferase which catalyzes the first step in the biosynthesis of the cyclic sugar alcohol pinitol. Pinitol accumulates in salt-stressed M.crystallinum and is abundant in a number of salt- and drought-tolerant plants. The presence of high levels of sugar alcohols correlates with osmotolerance in a diverse range of organisms, including bacteria, fungi and algae, as well as higher plants. The stress-initiated transcriptional induction of IMT1 expression in a facultative halophyte provides strong support for the importance of sugar alcohols in establishing tolerance to osmotic stress in higher plants.