In plants, basic-region/leucine-zipper (bZIP) transcription factors are key regulators of stress responses mediated by various phytohormone signalling pathways. However, the roles of bZIP transcription factors in pepper, particularly those associated with ABA signalling and drought stress, remain poorly understood. In this study, we isolated the CaADBZ1 (Capsicum annuum ABA and Dehydration-Induced bZIP transcription factor 1) gene, a member of the group A family, and analysed its functions in response to dehydration stress and ABA signalling. The expression of CaADBZ1 was specifically induced by dehydration and exogenous ABA treatment, not salinity and osmotic stress. CaADBZ1 was found to have transactivation activity in yeast cells, which was dependent on the N-terminal of CaADBZ1 (amino acids 1-112), harbouring a highly conserved C1 domain. Notably, a dual-luciferase reporter assay revealed that CaADBZ1 modulated the expression of CaOSR1, a dehydration stress-responsive gene in pepper plants. Functional studies in both pepper and Arabidopsis plants revealed that the modulation of CaADBZ1 expression level affected dehydration stress resistance in pepper and Arabidopsis plants. CaADBZ1-silenced pepper Arabidopsis plants showed dehydration stress-sensitive phenotypes characterized by higher transpiration rates and reduced expression of dehydration-responsive genes compared to control plants. Conversely, overexpression of the CaADBZ1 gene in Arabidopsis plants enhanced dehydration stress resistance. Moreover, CaADBZ1-overexpressing Arabidopsis transgenic plants showed increased ABA sensitivity during the seedling stage. Collectively, our findings suggest that CaADBZ1 plays a crucial role in enhancing dehydration stress tolerance in plants by positively regulating ABA sensitivity and dehydration-responsive gene expression.