Plant microRNAs (miRs) play an important role in regulating gene expression under normal and stressful environments. Here we report the functional implications on the role of Osa-miR820, which can be grouped as a young, rice-specific miR. It is a member of the class II transposon-derived small RNA family and is processed as 21-nt and 24-nt length variants, respectively. Size of the miR820 family varies from 1 to 16 across the Oryza AA genomes. The 21–nt Osa-miR820 negatively regulates a de novo methylase, OsDRM2 (domains rearranged methyl transferase) that prevents methylation of the CACTA transposon loci in the rice genome. In an earlier report we have detailed the expression profiles of Osa-miR820 and its target in abiotic stress responses using rice varieties exhibiting varying response to salt stress. In this study, artificial miR based approach was employed to specifically overexpress 21-nt Osa-miR820 in rice plants (OX-820). These plants exhibited enhanced vigour, ~25-30% increase in the number of spikelets per panicle and increased grain filling, under normal and salt stress conditions. The OX-820 lines showed a better water use efficiency and higher proline accumulation under salt stress. These plants can serve as a useful source for dissecting the molecular machinery governed by Osa-miR820:DRM2 node to prime tolerance to salt stress in an agronomically advantageous manner.