Water stress exists in most sugarcane cultivation areas, which are not supported by irrigation system and have low rain precipitation. Better understanding of physiological and biochemical mechanism, underlying plants response to water stress, have been achieved to develop drought-tolerant plants by biotechnology approach. To survive and grow normally, plants use a range of strategies to cope the water stress such as changes in gene expression and accumulation of organic compound called compatible solutes. Observation of drought stress response in sugarcane found the presence of a droughtinducible protein called SoDip22 and that the expression was induced by drought stress and ABA hormone treatments. However, the function of this drought-inducible protein has not been elucidated and only suggested that the protein may play an important role in maintenance of water molecule during water deficit state. Biochemical studies on the drought-tolerance mechanism have shown that nontoxic small compound of compatible solute accumulated during water deficit condition. Genetic engineering of glycine betaine (GB), acting as a compatible solute, has been applied for enhancement of water stress tolerance. In sugarcane, bacterial betA gene encodes for choline dehydrogenase (CDH) has successfully introduced and resulted in the transgenic drought-tolerance sugarcane. The CDH converts choline into betaine aldehyde, which is then converted to GB. The overexpression of betA gene increased GB contents that act as an osmoprotectant and help sugarcane acclimate in water deficit condition. This chapter reports the development of biotechnology for drought-tolerant sugarcane.