Isopentenyltransferase (IPT) is a critical enzyme in the cytokinin biosynthetic pathway. The expression of IPT under the control of a maturation- and stress-induced promoter was shown to delay stress-induced plant senescence that resulted in an enhanced drought tolerance in both monocot and dicot plants. This report extends the earlier findings in tobacco and rice to peanut (Arachis hypogaea L.), an important oil crop and protein source. Regulated expression of IPT in peanut significantly improved drought tolerance in both laboratory and field conditions. Transgenic peanut plants maintained higher photosynthetic rates, higher stomatal conductance and higher transpiration than wild-type control plants under reduced irrigation conditions. More importantly, transgenic peanut plants produced significantly higher yields than wild-type control plants in the field, indicating a great potential for the development of crops with improved performance and yield in water-limited areas of the world.