Os2H16, a rice gene of unknown function, has been previously reported to be upregulated in response to infection by Xanthomonas oryzae pv. oryzae. In this study, expression patterns of Os2H16 were analyzed, demonstrating that expression of Os2H16 was dramatically induced by both bacterial and fungal infection as well as by drought stress, but repressed by salt treatment. To further investigate the role of Os2H16 in plant defense responses to abiotic and biotic stresses, transgenic lines of rice were developed. In comparison with wild-type rice, transgenic lines overexpressing Os2H16 show enhanced tolerance to bacterial blight and sheath blight disease, respectively caused by Xanthomonas oryzae pv. oryzae and Rhizoctonia solani. On the contrary, Os2H16 knockdown lines were more susceptible to both pathogens. Consistent with their individual phenotypes, upon inoculation, the expression of defense-related marker genes were elevated in Os2H16 overexpression individuals than in wild-type, while they were significantly reduced in Os2H16 knockdown lines. We also show that Os2H16 overexpression lines display enhanced tolerance to drought stress and elevated induction of drought-related genes, compared to wild-type rice. Os2H16 knockdown lines were more sensitive to drought stress and exhibited reduced induction of drought-related genes. Our study provides the first functional characterization of the rice Os2H16 gene, and suggests that Os2H16 positively modulate plant defense to abiotic and biotic stress.