CBF/DREB (C-repeat binding factor/dehydration responsive element binding factor) family of transcription factors in plants is reported to be associated with regulation of gene expression under stress conditions. Here, we report the functional characterization of a DREB transcription factor, DREB1B gene from rice (Oryza sativa ssp. indica). The OsDREB1B gene was differentially regulated at the transcriptional level by osmotic stress, oxidative stress, salicylic acid, ABA, and cold. A 745 bp promoter region of OsDREB1B cDNA was fused to the β-glucuronidase (GUS) gene and introduced via Agrobacterium tumifaciens into the genome of Arabidopsis. Histochemical analysis of GUS expression in T2 transgenic Arabidopsis plants indicated that OsDREB1B shows stress-specific induction pattern in response to a variety of stresses like mannitol, NaCl, PEG, methyl viologen, cold, ABA, and salicylic acid. Leaf-order-dependent induction pattern of the promoter was observed in response to both cold and ABA stresses. Further, OsDREB1B cDNA was introduced into tobacco plants under the control of CaMV35S promoter to investigate the role of DREB1B product in plant stress response. Transgenic tobacco plants have shown improved seed germination, root growth, membrane stability, and 2, 2-diphenyl-1-pycrilhydrazil hydrate (DPPH) free radical scavenging activity under inhibitory concentrations of mannitol. Importantly, transgenic plants accumulated higher fresh weight under long-term osmotic stress, and also have shown retention of more water than the wild type during drought stress. Overexpression of OsDREB1B in tobacco also improved the oxidative and freezing stress tolerance of transgenic plants. In addition, tobacco plants constitutively expressing OsDREB1B have shown decreased sensitivity to tobacco streak virus infection. Constitutive expression of OsDREB1B in tobacco also induced the expression of PR genes in transgenic plants. The data obtained provide strong in vivo evidence that OsDREB1B is involved in both abiotic and biotic stress responses, and confers broad-spectrum stress tolerance to transgenic plants.