Drought is a major stress that affects the yield and quality of tea, a widely consumed beverage crop grown in more than 20 countries of the world. Therefore, osmotin gene-expressing transgenic tea plants produced using earlier optimized conditions were evaluated for their tolerance of drought stress and their quality. Improved tolerance of polyethylene glycol-induced water stress and faster recovery from stress were evident in transgenic lines compared with the normal phenotype. Significant improvements in growth under in-vitro conditions were also observed. Besides enhanced reactive oxygen species-scavenging enzyme activity, the transgenic lines contained significantly higher levels of flavan-3-ols and caffeine, key compounds that govern quality and commercial yield of the beverage. The selected transgenic lines have the potential to meet the demands of the tea industry for stress-tolerant plants with higher yield and quality. These traits of the transgenic lines can be effectively maintained for generations because tea is commercially cultivated through vegetative propagation only.