Abscisic acid (ABA), a plant hormone, is involved in responses to environmental stresses such as drought and high salinity, and is required for stress tolerance. ABA is synthesized de novo in response to dehydration. 9-cis-epoxycarotenoid dioxygenase (NCED) is thought to be a key enzyme in ABA biosynthesis. Here we demonstrate that the expression of an NCED gene of Arabidopsis, AtNCED3, is induced by drought stress and controls the level of endogenous ABA under drought-stressed conditions. Overexpression of AtNCED3 in transgenic Arabidopsis caused an increase in endogenous ABA level, and promoted transcription of drought- and ABA-inducible genes. Plants overexpressing AtNCED3 showed a reduction in transpiration rate from leaves and an improvement in drought tolerance. By contrast, antisense suppression and disruption of AtNCED3 gave a drought-sensitive phenotype. These results indicate that the expression of AtNCED3 plays a key role in ABA biosynthesis under drought-stressed conditions in Arabidopsis. We improved drought tolerance by gene manipulation of AtNCED3 causing the accumulation of endogenous ABA.