Herbaceous peony (Paeonia lactiflora Pall.) is known as the flower phase. This phase is somewhat resistant to drought, but long-term drought and severe water shortage will affect its normal growth and development. In this study, physiological indices and the transcriptome of P. lactiflora were determined to clarify its physiological responses and gene expression changes under drought stress. The results showed that under drought stress, soluble sugar content, peroxidase (POD), catalase (CAT) and ascorbate peroxidase (APX) activities, and chlorophyll, carotenoid and flavonoid contents were significantly increased, and soluble protein content, superoxide dismutase (SOD), glutathione reductase (GR), dehydroascorbate reductase (DHAR), monodehydroascorbate reductase (MDHAR), ascorbic acid (AsA) and glutathione (GSH) activity first increased and then decreased after day 14. Moreover, drought stress also significantly reduced chlorophyll content, photosynthesis and chlorophyll fluorescence parameters. Transcriptomic analysis revealed that compared with the Control, 10,747 differentially expressed genes (DEGs) were upregulated and 11,835 downregulated under drought stress. These DEGs were classified into three categories and 46 functional groups by GO function classification. The 3,179 DEGs were enriched into 128 pathways by KEGG pathway enrichment. The ROS system, chlorophyll degradation and photosynthetic capacity, as well as secondary pathways of biosynthesis and sugar metabolism were included. Additionally, relevant genes expressed in some metabolic pathways were discovered. These results provide a theoretical basis for understanding the responses of P. lactiflora to drought stress.