The ability of plants to tolerate drought conditions is crucial for agricultural production worldwide. Recent progress has been made in our understanding of gene expression, transcriptional regulation and signal transduction in plant responses to drought. Molecular and genomic analyses have facilitated gene discovery and enabled genetic engineering using several functional or regulatory genes to activate specific or broad pathways related to drought tolerance in plants. Several lines of evidence have indicated that molecular tailoring of genes has the potential to overcome a number of limitations in creating drought-tolerant transgenic plants. Recent studies have increased our understanding of the regulatory networks controlling the drought stress response and have led to practical approaches for engineering drought tolerance in plants.