The phytohormone ABA is a key stress signal in plants. Although the identification of ABA receptors led to significant progress in understanding the Arabidopsis ABA signaling pathway, there are still many unsolved mysteries regarding ABA signaling in monocots, such as rice. Here, we report that a rice ortholog of AtABI1 and AtABI2, named OsABI-LIKE2 (OsABIL2), plays a negative role in rice ABA signaling. Overexpression of OsABIL2 not only led to ABA insensitivity, but also significantly altered plant developmental phenotypes, including stomatal density and root architecture, which probably caused the hypersensitivity to drought stress. OsABIL2 interacts with OsPYL1, SAPK8 and SAPK10 both in vitro and in vivo, and the phosphatase activity of OsABIL2 was repressed by ABA-bound OsPYL1. However, unlike many other solely nuclear-localized clade A type 2C protein phosphatases (PP2Cs), OsABIL2 is localized in both the nucleus and cytosol. Furthermore, OsABIL2 interacts with and co-localized with OsPYL1 mainly in the cytosol, and ABA treatment regulates the nucleus–cytosol distribution of OsABIL2, suggesting a different mechanism for the activation of ABA signaling. Taken together, this study provides significant insights into rice ABA signaling and indicates the important role of OsABIL2 in regulating root development.