A novel DREB (dehydration responsive element binding protein) homologous gene, GmDREB2, was isolated from soybean. Based on its similarity with AP2 domains, GmDREB2 was classified into A-5 subgroup in DREB subfamily in AP2/EREBP family. Expression of GmDREB2 gene was induced by drought, high salt, and low temperature stresses and abscisic acid treatment. The GmDREB2 bound specifically to DRE element in vitro. Furthermore, the overexpression of GmDREB2 activated expression of downstream genes in transgenic Arabidopsis, resulting in enhanced tolerance to drought and high-salt stresses and did not cause growth retardation. Analysis of free proline contents in transgenic tobacco indicated that the overexpression of GmDREB2 accumulated higher level of free proline compared to the wild type plants under drought condition. The results from this study indicate that this novel soybean GmDREB2 gene functions as an important transcriptional activator and may be useful in improving of plant tolerance to abiotic stresses in plants.