Abiotic stress seriously affects the yield of rice (Oryza sativa L.). Grain yield in rice is multiplicatively determined by the number of panicles, number of grains per panicle, and grain weight. Here, we describe the molecular and functional characterization of STRESS_tolerance and GRAIN_LENGTH (OsSGL), a rice gene strongly up-regulated by a wide spectrum of abiotic stresses. OsSGL encodes a putative member of the DUF1645 protein family of unknown function. Overexpression of OsSGL significantly altered certain development processes greatly and positively affecting an array of traits in transgenic rice plants, including increased grain length, grain weight and grain number per panicle, resulting in a significant increase in yield. Microscopical analysis showed that the enhanced OsSGL expression promoted cell division and grain filling. Microarray and quantitative real-time PCR (qRT-PCR) analyses revealed that a large number of genes involved in stress-response, cell cycle and cytokinin signaling processes were induced or suppressed in OsSGL-overexpressing plants. Together, our results suggest that OsSGL may regulate stress-tolerance and cell growth by acting via a cytokinin signaling pathway. This study not only contributes to our understanding of the underlying mechanism regulating rice stress-tolerance and grain length, but also provides a strategy for tailor-made crop yield improvement.