RING (really interesting new gene) zinc‐finger proteins have important regulatory roles in the development of a variety of organisms. The XERICO gene encodes a small protein (162 amino acids) with an N‐terminal trans‐membrane domain and a RING‐H2 zinc‐finger motif located at the C‐terminus. In silico gene‐expression analysis indicated that XERICO is induced by salt and osmotic stress. Compared with wild‐type (WT) Arabidopsis plants, transgenic plants overexpressing XERICO (35S::XERICO) exhibited hypersensitivity to salt and osmotic stress and exogenous abscisic acid (ABA) during germination and early seedling growth. When subjected to a drought treatment, transcriptional upregulation of a key ABA‐biosynthesis gene, AtNCED3, was much faster and stronger in 35S::XERICO plants compared with WT plants. Further, upregulation of XERICO substantially increased cellular ABA levels. The adult 35S::XERICO plants, in contrast to early seedling growth, showed a marked increase in their tolerance to drought stress. Yeast two‐hybrid screening indicated that XERICO interacts with an E2 ubiquitin‐conjugating enzyme (AtUBC8) and ASK1‐interacting F‐box protein (AtTLP9), which is involved in the ABA‐signaling pathway. Affymetrix GeneChip array analysis showed that the expressions of many of the genes involved in the biosynthesis of plant hormones (e.g. ethylene, brassinosteroid, gibberellic acid) were significantly changed in the 35S::XERICO plants. These results suggest that the homeostasis of various plant hormones might be altered in 35S::XERICO plants, possibly by overaccumulation of ABA.