Drought and high salinity are two major abiotic stresses that significantly affect agricultural crop productivity worldwide. Annexins are a multigene family that plays an essential role in plant stress responses and various cellular processes. Here, the AnnSp2 gene was cloned from drought-resistant wild tomato (Solanum pennellii) and functionally characterized in cultivated tomato. AnnSp2 protein was localized in the nucleus and had higher expression in leave, flower and fruit. It was induced by several phytohormones and some abiotic stresses. Tomato plants overexpressing AnnSp2 had increased tolerance to drought and salt stress, as determined by analysis of various physiological parameters. AnnSp2-transgenic plants were less sensitive to ABA during the seed germination and seedling stages. However, under drought stress, the ABA content significantly increased in the AnnSp2-overexpressing plants, inducing stomatal closure and reducing water loss, which underlay the plants’ enhanced stress tolerance. Furthermore, scavenging reactive oxygen species (ROS), higher total chlorophyll content, lower lipid peroxidation levels, increased peroxidase activities (including APX, CAT and SOD) and higher levels of proline were observed in AnnSp2-overexpressing plants. These results indicate that overexpression of AnnSp2 in transgenic tomato improves salt and drought tolerance through ABA synthesis and the elimination of ROS.