X1-homologous genes (XHS) encode plant-specific proteins containing three major domains (XH, XS, zf-XS), but their functions are largely unknown. We report the systematic identification and characterization of XHS genes in the rice genome. Eleven putative XHS protein sequences (OXHS1-11) were identified in the sequenced genome of Oryza sativa japonica cv. Nipponbare, and these sequences, along with other plant XHS homologues, were classified into five subgroups based on phylogenetic analysis. Distinct diversification of the XHS proteins occurred between monocotyledon and dicotyledon plants. The OXHS family has diverse exon-intron structures and organizations of putative domains and motifs. The OXHS proteins showed no transactivation activity, and no interaction between the XH domain and the XS domain in yeast. Four representative OXHS proteins were targeted to cytoplasm, which contradicts the previous speculation that XHS proteins are putative transcription factors. All the OXHS genes are predominantly expressed in floral organs, and some are expressed in a wide range of tissues or organs in indica rice Minghui 63. Nine OXHS genes are responsive to at least one of the abiotic stresses including drought, salt, cold, and abscisic acid treatment. Over-expression of one stress-responsive gene OXHS2 in rice resulted in reduced tolerance to salt and drought stresses. These results suggest that the OXHS family may be functionally diversified and some members of this family may play important roles in regulating stress tolerance in rice.