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Jordan is very vulnerable to drought because of its location in the arid to semi-arid part of the Middle East. Droughts coupled with water scarcity are becoming a serious threat to the economic growth, social cohesion and political stability. Rainfall time series from four rain stations covering the Jordan River Basin were analyzed for drought characterization and forecasting using standardized precipitation index (SPI), Markov chain and autoregressive integrated moving average (ARIMA) model. The 7-year moving average of Amman data showed a decreasing trend while data from the other three stations were stable or showed an increasing trend. The frequency analysis indicated 2-year return period for near zero SPI values while the return period for moderate drought was 7 years. Successive droughts had occurred at least three times during the past 40 years. Severe droughts are expected once every 20 -25 year period at all rain stations. The extreme droughts were rare events with return periods between 80 and 115 years. There are equal occurrence probabilities for drought and wet conditions in any given year, irrespective, of the condition in the previous year. The results showed that ARIMA model was successful in predicting the overall statistics with a given period at annual scales. The overall number of predicted/observed droughts during the validation periods were 2/2 severe droughts for Amman station and, 0/1, 1/1, 0/1 extreme droughts for Amman, Irbid and Mafraq stations, respectively. In addition, the ARIMA model also predicted 3 out of 4 actual moderate droughts for Amman and Mafraq stations. It was concluded that early warning of developing droughts can be deduced form the monthly Markov transitional probabilities. ARIMA models can be used as a forecasting tool of the future drought trends. Using the first and second order Markov probabilities can complement the ARIMA predictions.