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Melatonin is a potent naturally occurring reactive oxygen species (ROS) and reactive nitrogen species (RNS) scavenger in plants. Melatonin protects plants from oxidative stress and, therefore, it improves their tolerance against a variety of environmental abiotic stressors. N-acetylserotonin-O-methyltransferase (ASMT) is a specific enzyme required for melatonin synthesis. In this report, an ASMT gene was cloned from apple rootstock (Malus zumi Mats) and designated as MzASMT1 (KJ123721). The MzASMT1 expression was induced by drought stress in apple leaves. The upregulation of MzASMT1 in the apple leaf positively relates to melatonin production over a 24-hr dark/light cycle. Purified MzASMT1 protein expressed in E. coli converted its substrates to melatonin with an activity of approximately 5.5 pmol/min/mg protein. The transient transformation in tobacco identified that MzASMT1 is located in cytoplasm of the cell. When MzASMT1 gene driven by 35S promoter was transferred to Arabidopsis, melatonin levels in transgenic Arabidopsis plants were 2–4 times higher than those in the wild type. The transgenic Arabidopsis plants had significantly lower intrinsic ROS than the wild type and therefore these plants exhibited greater tolerance to drought stress than that of wild type. This is, at least partially, attributed to the elevated melatonin levels resulting from the overexpression of MzASMT1. The results elucidated the important role that membrane-located melatonin synthase plays in drought tolerance. These findings have significant implications in agriculture.