Genes involved in the mechanisms of plant responses to salt stress may be used as biotechnological tools for the genetic improvement of salt tolerance in crop plants. This would help alleviate the increasing problem of salinization of lands cultivated under irrigation in arid and semi-arid regions. We have isolated a novel halotolerance gene from Arabidopsis thaliana, A. thaliana Li-tolerant lipase 1 (AtLTL1), on the basis of the phenotype of tolerance to LiCl conferred by its expression in yeast. AtLTL1 encodes a putative lipase of the GDSL-motif family, which includes bacterial and a very large number of plant proteins. In Arabidopsis, AtLTL1 expression is rapidly induced by LiCl or NaCl, but not by other abiotic stresses. Overexpression of AtLTL1 increases salt tolerance in transgenic Arabidopsis plants, compared to non-transformed controls, allowing germination of seeds in the presence of toxic concentrations of LiCl and NaCl, and stimulating vegetative growth, flowering and seed set in the presence of NaCl. These results clearly point to a role of AtLTL1 in the mechanisms of salt tolerance. In addition, we show that AtLTL1 expression is also activated, although only transiently, by salicylic acid (SA), suggesting that the lipase could also be involved in defence reactions against pathogens.