Drought is a major environmental threat to agriculture sustainability. We have characterised the role of OsICE1, a basic helix-loop-helix (bHLH) transcription factor from rice (Otyza saliva L.), in response to drought. OsICEI gene is constitutively expressed in roots and shoots of rice seedlings grown under control conditions, as well as in response to low temperature, high salinity, and ABA. Nevertheless, in response to drought, OsICE1 is up-regulated in roots. Plants over-expressing OsICE1 (OsICEI-OX) show improved drought tolerance at both vegetative and reproductive stages, whereas OsICE1 silenced plants (OsICE1-RNA1) show decreased drought tolerance in the same phenological stages. Under drought, OsICE1-0X plants show improved net photosynthetic rates and stomatal conductance to water vapour, as well as higher photochemical efficiency of photosystem II and tolerance to photo-inhibition, as compared to the WT and OsICEI-RNAi. In addition, under severe drought, OsICEI-OX plants show lower grain yield losses than WT, while OsICE1-12NAi plants show the highest grain losses. OsICE1-OX and OSICE1-RNAi plants do not differentially respond to ABA, and drought-inducible genes are more responsive in OsICEI-RNAi and less in OsICE1-OX plants (as compared to WT), suggesting that OsICE1 has a central role modulating molecular responses to drought in an ABA-independent way. This role might be mediated by OsWsi18, a LEA encoding gene up regulated in OsICE1-OX rice plants and known to enhance membrane stability under drought.