An Arabidopsis thaliana drought-tolerant mutant, altered expression of APX2 (alx8), has constitutively increased abscisic acid (ABA) content, increased expression of genes responsive to high light stress and is reported to be drought tolerant. We have identified alx8 as a mutation in SAL1, an enzyme that can dephosphorylate dinucleotide phosphates or inositol phosphates. Previously identified mutations in SAL1, including fiery (fry1-1), were reported as being more sensitive to drought imposed by detachment of rosettes. Here we demonstrate that alx8, fry1-1 and a T-DNA insertional knockout allele all have markedly increased resistance to drought when water is withheld from soil-grown intact plants. Microarray analysis revealed constitutively altered expression of more than 1800 genes in both alx8 and fry1-1. The up-regulated genes included some characterized stress response genes, but few are inducible by ABA. Metabolomic analysis revealed that both mutants exhibit a similar, dramatic reprogramming of metabolism, including increased levels of the polyamine putrescine implicated in stress tolerance, and the accumulation of a number of unknown, potential osmoprotectant carbohydrate derivatives. Under well-watered conditions, there was no substantial difference between alx8 and Col-0 in biomass at maturity; plant water use efficiency (WUE) as measured by carbon isotope discrimination; or stomatal index, morphology or aperture. Thus, SAL1 acts as a negative regulator of predominantly ABA-independent and also ABA-dependent stress response pathways, such that its inactivation results in altered osmoprotectants, higher leaf relative water content and maintenance of viable tissues during prolonged water stress.