Rapamycin is an anticancer agent and immunosuppressant that acts by inhibiting the TOR signaling pathway. In yeast, rapamycin mediates a profound transcriptional response for which the RRD1 gene is required. To further investigate this connection, we performed genome-wide location analysis of RNA polymerase II (RNAPII) and Rrd1 in response to rapamycin and found that Rrd1 colocalizes with RNAPII on actively transcribed genes and that both are recruited to rapamycin responsive genes. Strikingly, when Rrd1 is lacking, RNAPII remains inappropriately associated to ribosomal genes and fails to be recruited to rapamycin responsive genes. This occurs independently of TATA box binding protein recruitment but involves the modulation of the phosphorylation status of RNAPII CTD by Rrd1. Further, we demonstrate that Rrd1 is also involved in various other transcriptional stress responses besides rapamycin. We propose that Rrd1 is a novel transcription elongation factor that fine-tunes the transcriptional stress response of RNAPII.