Drought and salinity are major abiotic stresses to crop production. Here, we show that overexpression of stress responsive gene SNAC1 (STRESS-RESPONSIVE NAC 1) significantly enhances drought resistance in transgenic rice (22-34% higher seed setting than control) in the field under severe drought stress conditions at the reproductive stage while showing no phenotypic changes or yield penalty. The transgenic rice also shows significantly improved drought resistance and salt tolerance at the vegetative stage. Compared with WT, the transgenic rice are more sensitive to abscisic acid and lose water more slowly by closing more stomatal pores, yet display no significant difference in the rate of photosynthesis. SNAC1 is induced predominantly in guard cells by drought and encodes a NAM, ATAF, and CUC (NAC) transcription factor with transactivation activity. DNA chip analysis revealed that a large number of stress-related genes were up-regulated in the SNAC1-overexpressing rice plants. Our data suggest that SNAC1 holds promising utility in improving drought and salinity tolerance in rice.