Plant often responds to fungal pathogens by expressing a group of proteins known as pathogenesis-related proteins (PRs). The expression of PR is mediated through pathogen-induced signal-transduction pathways that are fine-tuned by phytohormones such as methyl jasmonate (MeJA). Here, we report functional characterization of an Ocimum basilicum PR5 family member (ObTLP1) that was identified from a MeJA-responsive expression sequence tag collection. ObTLP1 encodes a 226 amino acid polypeptide that showed sequence and structural similarities with a sweet-tasting protein thaumatin of Thaumatococcus danielli and also with a stress-responsive protein osmotin of Nicotiana tabacum. The expression of ObTLP1 in O. basilicum was found to be organ-preferential under unstressed condition, and responsive to biotic and abiotic stresses, and multiple phytohormone elicitations. Bacterially-expressed recombinant ObTLP1 inhibited mycelial growth of the phytopathogenic fungi, Scleretonia sclerotiorum and Botrytis cinerea; thereby, suggesting its antifungal activity. Ectopic expression of ObTLP1 in Arabidopsis led to enhanced tolerance to S. sclerotiorum and B. cinerea infections, and also to dehydration and salt stress. Moreover, induced expression of the defense marker genes suggested up-regulation of the defense-response pathways in ObTLP1-expressing Arabidopsis upon fungal challenge. Thus, ObTLP1 might be useful for providing tolerance to the fungal pathogens and abiotic stresses in crops.