Proline accumulates in a variety of plant species in response to stresses such as drought, salinity and extreme temperatures. Although its role in plant osmotolerance remains controversial, proline is thought to contribute to osmotic adjustment, detoxification of reactive oxygen species and protection of membrane integrity. In the present study, we evaluated the effects of stress-inducible proline production on osmotic adjustment, chlorophyll fluorescence and oxidative stress protection in transgenic sugarcane transformed with a heterologous P5CS gene. In well-watered conditions, free proline, malondialdehyde (MDA) levels, Fv/Fm ratios and chlorophyll contents (Chls) in transgenic sugarcane were not statistically different from non-transformed control plants. After 9 days without irrigation, proline content in transgenic events was on the average 2.5-fold higher than in controls. However, no osmotic adjustment was observed in plants overproducing proline during the water-deficit period. The photochemical efficiency of PSII observed was higher (65%) in the transgenic events at the end of the water-deficit experiment. The effects of proline on lipid peroxidation as MDA levels and on the decline of Chl in paraquat-treated leaf discs along the drought period suggest that proline protected the plants against the oxidative stress caused by the water deficit. The overall capacity of transgenic plants to tolerate water-deficit stress could be assessed by the significantly higher biomass yields 12 days after withholding water. These results suggest that stress-inducible proline accumulation in transgenic sugarcane plants under water-deficit stress acts as a component of antioxidative defense system rather than as an osmotic adjustment mediator.