Agricultural productivity is threatened by increasing incidence of drought and the drought tolerant cyanobacteria offer a better solution in the restoration of soil fertility and productivity. The present study describes the comparative physiological response of the cyanobacterium Anabaena sp. acclimated and un-acclimated to desiccation stress induced by polyethylene glycol (10% PEG). While, the acclimated cyanobacterial cells grew luxuriantly with optimal chlorophyll content, photosynthetic activities and nitrogen fixation, the un-acclimated cells exhibited reduced growth rate, chlorophyll content, photosynthetic activities and nitrogen fixation. Distinct differences in the accumulation of lipid peroxidation products, proline and activity of superoxide dismutase were observed under identical growth conditions in the acclimated and un-acclimated cells. Desiccation-acclimated and un-acclimated cyanobacteria showed significant alterations in the abundance of important proteins in the proteome. Two-dimensional gel electrophoresis followed by MALDI-TOF-MS/MS analysis identified twelve proteins. The acclimated cells showed the up regulation of proteins such as Rubisco, fructose-bis-phosphate aldolase, fructose 1-6 bisphosphatase, phosphoglycerate dehydrogenase and elongation factors Tu and Ts as compared to un-acclimated cells. Therefore, the ability to maintain photosynthesis, antioxidants and increased accumulation of proteins related to energy metabolism helped the acclimated cyanobacterium Anabaena sp. to grow optimally under desiccation stress conditions.