E3 ubiquitin ligases have been positively or negatively implicated in the response to water-deficit stress. Here we demonstrate that rice XA21 binding protein 3 (XB3), the founder member of an E3 ubiquitin ligase gene family, is induced by drought stress and, when over-expressed, enhances survival of rice plants under water deficit. Down-regulation of XB3 increases rice sensitivity to drought. The E3 ubiquitin ligase is localized to both the plasma membrane and the nucleus. XB3 interacts with OsDIS1, a nuclear-localized rice ubiquitin ligase playing a negative role in responding to water-deficit stress. Co-expression of XB3 and OsDIS1 in Nicotiana benthamiana leads to a reduced accumulation of OsDIS1. Our data, together with the discoveries made by others, indicate that some members of the XB3 ubiquitin ligase family are positively involved in regulating the response to water deficit possibly through directly or indirectly destabilizing their substrates (e.g., OsDIS1) in the nucleus. Genes in this family could be used for engineering drought tolerance in major food crops.