Transcription factors have been shown to control the activity of multiple stress response genes in a coordinated manner and therefore represent attractive targets for application in molecular plant breeding. We investigated the possibility of modulating the transcriptional regulation of drought and cold responses in the agriculturally important species, wheat and barley, with a view to increase drought and frost tolerance. Transgenic wheat and barley plants were generated showing constitutive (double 35S) and drought-inducible (maize Rab17) expression of the TaDREB2 and TaDREB3 transcription factors isolated from wheat grain. Transgenic populations with constitutive over-expression showed slower growth, delayed flowering and lower grain yields relative to the nontransgenic controls. However, both the TaDREB2 and TaDREB3 transgenic plants showed improved survival under severe drought conditions relative to nontransgenic controls. There were two components to the drought tolerance: real (activation of drought-stress-inducible genes) and ‘seeming’ (consumption of less water as a result of smaller size and/or slower growth of transgenics compared to controls). The undesired changes in plant development associated with the ‘seeming’ component of tolerance could be alleviated by using a drought-inducible promoter. In addition to drought tolerance, both TaDREB2 and TaDREB3 transgenic plants with constitutive over-expression of the transgene showed a significant improvement in frost tolerance. The increased expression of TaDREB2 and TaDREB3 lead to elevated expression in the transgenics of 10 other CBF/DREB genes and a large number of stress responsive LEA/COR/DHN genes known to be responsible for the protection of cell from damage and desiccation under stress.