Aldehyde dehydrogenases (ALDHs) play a major role in the detoxification processes of aldehydes generated in plants when exposed to abiotic stress. In previous studies, we have shown that the Arabidopsis thaliana ALDH3I1 gene is transcriptionally activated by abiotic stress, and over-expression of the ALDH3I1 gene confers stress tolerance in transgenic plants. The A. thaliana genome contains 14 ALDH genes expressed in different sub-cellular compartments and are presumably involved in different reactions. The purpose of this study was to compare the potential of a cytoplasmic and a chloroplastic stress-inducible ALDH in conferring stress tolerance under different conditions. We demonstrated that constitutive or stress-inducible expression of both the chloroplastic ALDH3I1 and the cytoplasmic ALDH7B4 confers tolerance to osmotic and oxidative stress. Stress tolerance in transgenic plants is accompanied by a reduction of H2O2 and malondialdehyde (MDA) derived from cellular lipid peroxidation. Involvement of ALDHs in stress tolerance was corroborated by the analysis of ALDH3I1 and ALDH7B4 T-DNA knockout (KO) mutants. Both mutant lines exhibited higher sensitivity to dehydration and salt than wild-type (WT) plants. The results indicate that ALDH3I1 and ALDH7B4 not only function as aldehyde-detoxifying enzymes, but also as efficient reactive oxygen species (ROS) scavengers and lipid peroxidation-inhibiting enzymes. The potential of ALDHs to interfere with H2O2 was also shown for recombinant bacterial proteins.