Cytochrome P450s (CYPs) play crucial roles in regulating plant growth, development, and stress tolerance. In this study, a perennial ryegrass (Lolium perenne) CYP gene, LpCYP72A15, was identified as a candidate gene regulating plant osmotic stress tolerance based on a cDNA library screening in the background of yeast ∆hog1 mutant. LpCYP72A15 is localized in the plastids, and its expression was regulated by osmotic stress and ABA treatment. Overexpressing LpCYP72A15 significantly enhanced plant drought tolerance in both Arabidopsis and perennial ryegrass. Under drought stress, the transgenic ryegrass showed significant lower reactive oxygen species (ROS) levels, higher ROS‐scavenging enzymatic activities, and higher soluble sugar contents than the wildtype plants. Transient over‐expressing the gene also enhanced survival rates of ryegrass mesophyll protoplasts under H2O2‐induced oxidative or mannitol‐enforced osmotic stresses. Taken together, LpCYP72A15 confers oxidative‐ and osmotic‐stress tolerances that positively regulates plant drought tolerance in perennial ryegrass.