A novel gene, OsAHL1, containing an AT-hook motif and a PPC domain was identified through genome-wide profiling and analysis of mRNAs by comparing the microarray of drought-challenged versus normally watered rice. The results indicated OsAHL1 has both drought avoidance and drought tolerance that could greatly improve drought resistance of the rice plant. Overexpression of OsAHL1 enhanced multiple stress tolerances in rice plants during both seedling and panicle development stages. Functional studies revealed that OsAHL1 regulates root development under drought condition to enhance drought avoidance, participates in oxidative stress response and also regulates the content of chlorophyll in rice leaves. OsAHL1 specifically binds to the A/T rich sequence region of promoters or introns, and hence directly regulates the expression of many stress related downstream genes.