The oxidative cleavage of cis-epoxycarotenoids catalyzed by 9-cis-epoxycarotenoid dioxygenase (NCED) is considered to be the rate-limiting step in abscisic acid (ABA) biosynthesis. Here we demonstrate that the expression of AhNCED1 gene in peanut plants is significantly up-regulated by dehydration and high salinity. The AhNCED1 transcript and endogenous ABA both accumulate predominantly in leaves and stems of peanut in response to dehydration. The considerable up-regulation of AhNCED1 expression by exogenous application of ABA suggests a positive feedback control of ABA biosynthesis in peanut. NAA at high concentration increases ABA biosynthesis in peanut plants through up-regulation of the AhNCED1 gene expression. The constitutive expression of the AhNCED1 gene in wild-type Arabidopsis results in an increase of ABA accumulation in transgenic plants in response to drought stress. Ectopic expression of AhNCED1 gene in 129B08/nced3 mutant Arabidopsis (with impaired AtNCED3 gene involved in ABA biosynthesis under water stress) driven by the AtNCED3 promoter restores its ability to accumulate ABA during drought stress, and reverts its hypersensitivity to nonionic osmotic stress and soil drought. These results indicate that the expression of AhNCED1 gene plays an important role in the regulation of ABA level during water stress, and that water-stress tolerance of Arabidopsis plants can be improved by ectopic expression of the AhNCED1 gene causing accumulation of endogenous ABA.