Background Drought stress is a major prevalent environmental factor impairing growth. Melatonin mitigates the impacts of drought stress on plants. However, melatonin’s role in Phoebe sheareri (Hemsl.) Gamble (P. sheareri) is unknown. We aimed to reveal the protective effects of melatonin on P. sheareri seedlings under drought conditions. Methods Melatonin was sprayed under drought or normal water conditions. The parameters, including growth, physiological factors, and phytohormones of P. sheareri, were examined. Results Compared to the normal control group, drought stress inhibited the growth of seedlings and significantly reduced the content of carotenoids, SOD, POD, APX, PPO, CAT, GR, and soluble sugars, and increased the contents of MDA, O2•−, proline, soluble proteins, ABA, and JA-Me in P. sheareri seedlings. However, melatonin treatment significantly reversed the adverse drought-induced responses and promoted the P. sheareri seedling’s growth. Moreover, the heatmap and principal component analysis suggested a high similarity in the behavior patterns of the six measured antioxidant enzymes in P. sheareri seedlings. Conclusion Our study reported for the first time that melatonin has a protective role in P. sheareri seedlings under drought-stress conditions. This role is related to ROS scavenging, activation of antioxidant enzymes, and crosstalk of phytohormones. This study provided a theoretical basis for improving the ability of P. sheareri adapted to arid environments.