Drought is a complex stress that limits plant growth and crop production worldwide. The mechanisms by which plants coordinately respond to distinct levels of water deficits (e.g., mild, moderate or severe drought) remain elusive. Here we demonstrate that the rice immune sensor XA21 promotes survival of rice seedlings during dehydration stress. XA21 expression increases deposition of lignin and cellulose in the xylem vessels and their surrounding cells. Inhibition of aquaporin water channels by mercuric chloride eliminates XA21-mediated dehydration survival, suggesting that XA21 enables plant survival during drought, probably by protecting xylem functionality. In contrast to prevailing observations of stress tolerance genes, XA21 is also capable of enhancing rice growth during moderate drought. Thus, XA21 acts as a mediator for stress protection and plant growth under water-limiting conditions.