Osmoprotectants stabilize proteins and membranes against the denaturing effect of high concentrations of salts and other harmful solutes. In yeast, arabitol dehydrogenase (ArDH) reduces D-ribulose to D-arabitol where D-ribulose is derived by dephosphorylating D-ribulose-5-PO4 in the oxidized pentose pathway. Osmotolerance in plants could be developed through metabolic engineering of chloroplast genome by introducing genes encoding polyols since chloroplasts offer high level transgene expression and containment. Here, we report that ArDH expression in tobacco chloroplasts confers tolerance to NaCl (up to 400 mM). Transgenic plants compared to wild type (WT) survived for only 4–5 weeks on 400 mM NaCl whereas plants remained green and grew normal on concentrations up to 350 mM NaCl. Further, a-week-old seedlings were also challenged with poly ethylene glycol (PEG, up to 6%) in the liquid medium, considering that membranes and proteins are protected under stress conditions due to accumulation of arabitol in chloroplasts. Seedlings were tolerant to 6% PEG, suggesting that ARDH enzyme maintains integrity of membranes in chloroplasts under drought conditions via metabolic engineering. Hence, the gene could be expressed in agronomic plants to withstand abiotic stresses.