The molecular signals and pathways that govern biotic and abiotic stress responses in sugarcane are poorly understood. Here we describe SodERF3, a sugarcane (Saccharum officinarum L. cv Ja60-5) cDNA that encodes a 201-amino acid DNA-binding protein that acts as a transcriptional regulator of the ethylene responsive factor (ERF) superfamily. Like other ERF transcription factors, the SodERF3 protein binds to the GCC box, and its deduced amino acid sequence contains an N-terminal putative nuclear localization signal (NLS). In addition, a C-terminal short hydrophobic region that is highly homologous to an ERF-associated amphiphilic repression-like motif, typical for class II ERFs, was found. Northern and Western blot analysis showed that SodERF3 is induced by ethylene. In addition, SodERF3 is induced by ABA, salt stress and wounding. Greenhouse-grown transgenic tobacco plants (Nicotiana tabacum L. cv. SR1) expressing SodERF3 were found to display increased tolerance to drought and osmotic stress.