We performed activation tagging screen to isolate abscisic acid (ABA) response mutants. One of the mutants, designated ahs10 (ABA-hypersensitive 10), exhibited ABA-hypersensitive phenotypes. TAIL-PCR analysis of the mutant revealed that T-DNA was inserted in the promoter region of the Arabidopsis gene, At2g01430, which encodes a homeodomain-leucine zipper protein ATHB17. Subsequent expression analysis indicated that ATHB17 was activated in ahs10. To recapitulate the mutant phenotypes, we prepared ATHB17 OX lines and investigated their phenotypes. The results showed that ATHB17 confers ABA-hypersensitivity and drought tolerance. On the contrary, ATHB17 knockout lines were ABA-insensitive and drought-sensitive, further demonstrating that ATHB17 is involved in ABA and water-stress responses. Interestingly, the ATHB17 effect on seedling growth in the presence of ABA was observed only during the postgermination seedling establishment stage, suggesting that it functions during a narrow developmental window of early seedling growth.