Recent genomic and genetic analyses based on Arabidopsis suggest that ubiquitination plays crucial roles in the plant response to abiotic stress and the phytohormone abscisic acid (ABA). However, few such studies have been reported in rice as a monocotyledonous model plant. Taking advantage of strategies in biochemistry, molecular cell biology and genetics, the RING-finger containing E3 ligase OsSDIR1 (Oryza sativa SALT-AND DROUGHT-INDUCED RING FINGER 1) was found to be a candidate drought tolerance gene for engineering of crop plants. The expression of OsSDIR1 was detected in all tissues of rice and up-regulated by drought and NaCl, but not by ABA. In vitro ubiquitination assays demonstrated that OsSDIR1 is a functional E3 ubiquitin ligase and that the RING finger region is required for its activity. OsSDIR1 could complement the drought sensitive phenotype of the sdir1 mutant and overexpressing transgenic Arabidopsis were more sensitive to ABA, indicating that the OsSDIR1 gene is a functional ortholog of SDIR1. Upon drought treatment, the OsSDIR1-transgenic rice showed strong drought tolerance compared to control plants. Analysis of the stomata aperture revealed that there were more closed stomatal pores in transgenic plants than those of control plants. This result was also confirmed by the water loss assay and leaf related water content (RWC) measurements during drought treatment. Thus, we demonstrated that monocot- and dicot- SDIR1s are conserved yet have diverse functions.