Glutathione S-transferases (GSTs) are multifunctional proteins encoded by large gene family in plants, which play important role in cellular detoxification of several endobiotic and xenobiotic compounds. Previously, we suggested the diverse roles of rice GST gene family members in plant development and various stress responses based on their differential expression. In this study, we report the functional characterization of a rice tau class GST gene, OsGSTU4. OsGSTU4 fusion protein was found to be localized in nucleus and cytoplasm. The over-expression of OsGSTU4 in E. coli resulted in better growth and higher GST activity under various stress conditions. Further, we raised over-expression transgenic Arabidopsis plants to reveal its in planta function. These transgenic lines showed reduced sensitivity towards plant hormones, auxin and abscisic acid. Various analyses revealed improved tolerance in transgenic Arabidopsis plants towards salinity and oxidative stresses, which may be attributed to the lower accumulation of reactive oxygen species and enhanced GST activity. In addition, microarray analysis revealed up-regulation of several genes involved in stress responses and cellular detoxification processes in the transgenic plants as compared to wild-type. These results suggest that OsGSTU4 can be used as a good candidate for the generation of stress-tolerant crop plants.