Auxin signaling is a fundamental part of many plant growth processes and stress responses and operates through Aux/IAA protein degradation and the transmission of the signal via auxin response factors (ARFs). A total of 31 Aux/IAA genes have been identified in rice (Oryza sativa), some of which are induced by drought stress. However, the mechanistic link between Aux/IAA expression and drought responses is not well understood. In this study we found that the rice Aux/IAA gene OsIAA6 is highly induced by drought stress and that its overexpression in transgenic rice improved drought tolerance, likely via the regulation of auxin biosynthesis genes. We observed that OsIAA6 was specifically expressed in the axillary meristem of the basal stem, which is the tissue that gives rise to tillers. A knock-down mutant of OsIAA6 showed abnormal tiller outgrowth, apparently due to the regulation of the auxin transporter OsPIN1 and the rice tillering inhibitor OsTB1. Our results confirm that the OsIAA6 gene is involved in drought stress responses and the control of tiller outgrowth.