Rice cultivation in Egypt is limited by the scarcity of water resources. The main strategy of rice breeders to overcome this problem is to develop new high-yielding varieties that are tolerant to drought stress. In this study, an drought-tolerant (IR60080-46A) variety was crossed with commercial Egyptian varieties using the back-cross method and marker-assisted selection (MAS) approach. The advanced lines of these crosses were selected under drought stress conditions. The best-performing candidate line, RBL-112, and its parental genotypes, were evaluated under drought stress and control conditions. The RBL-112 line showed superior its root system, which in turn produced higher grain yield under drought-stress conditions than its parental and check genotypes. Furthermore, physiological and biochemical studies showed that the RBL-112 line maintained higher relative water content (RWC), maximum quantum efficiency of photosystem II (Fv/Fm) values, proline content, superoxide dismutase (SOD) activity, and lower malondialdehyde (MDA) content compared to its parents and the check. The functional expression profiles of 22 drought tolerance-related genes were studied, out of which the genes OsAHL1, OsLEA3, OsCATA, OsP5CS, OsSNAC1, Os1g64660, OsRab21, OsAPX2, OsDREB2A, OsSKIPa, and OsLG3 were strongly induced in the newly developed RBL-112 line under drought-stress conditions. It could be concluded that the new line has a higher capacity to modulate physiological activities and expression levels of several drought-induced genes to withstand drought stress with high yielding ability. This finding suggests that the RBL-112 line presents a promising new addition to enable sustainable rice cultivation under water-limited conditions, and confirms the efficiency of the approach implemented in the current study.