Ca(2+) is an important second messenger in plant signal transduction pathways regulating stress-induced gene expression. Functional analysis of plant proteins containing Ca(2+)-binding domains (C2 domains) will help us understand the mechanisms behind the role of transcriptional regulators in the Ca(2+) signalling pathway and open new perspectives for crop genetic improvement. We identified a novel transcriptional regulator, a Ca(2+)-dependent lipid-binding protein (AtCLB) containing a C2 domain. AtCLB binds specifically to the promoter of the Arabidopsis thalianol synthase gene (AtTHAS1), whose expression is induced by gravity and light. Here we describe the role of the Atclb gene encoding the AtCLB protein. Expression of the Atclb gene was documented in all analysed tissues of Arabidopsis (leaf, root, stem, flower, and silique) by real-time PCR analysis. Immunofluorescence analysis revealed that AtCLB protein is localized in the nucleus of cells in Arabidopsis root tips. We demonstrated that the AtCLB protein was capable of binding to the membrane lipid ceramide. The role of the Atclb gene in negatively regulating responses to abiotic stress in Arabidopsis thaliana was identified. The loss of the Atclb gene function confers an enhanced drought and salt tolerance and a modified gravitropic response in T-DNA insertion knockout mutant lines. Expression of AtTHAS1 in Atclb knockout mutant lines was increased compared with wild type and a 35S-Atclb overexpression line suggesting AtCLB as a transcriptional repressor of AtTHAS1.