Previously, we reported on a tomato ERF transcription activator, TERF1, which was concluded to act as a linker between ethylene and osmotic signal pathways. We now report on the regulatory role of TERF1 in ABA sensitivity and drought response during seedling development. Northern blotting analysis indicated that the transcripts of TERF1 were significantly accumulated in response to drought, cold and ABA. TERF1 activated GCC box- or DRE-driven reporter gene expression in transient expression assay, subsequently increasing the tolerance to drought and the osmoticum, PEG6000, in tobacco expressing TERF1. Further tests showed that TERF1 did not affect the seed germination, but greatly enhanced the sensitivity during tobacco seedling development under ABA treatment. This ABA hypersensitivity in transgenic TERF1 tobacco is both indirect ethylene action and expressions of ABA responsive genes, demonstrating that TERF1 is a multifunctional ERF protein that can integrate different stress signal pathways.