Agricultural production has been adversely affected worldwide by environmental restraints, especially by drought and salinity because of their high scale of impact and wide distribution. Conventional breeding programmes seeking improvement of stress tolerance are a long-term endeavour as the trait is multigenic, and genetic variability among crop plants is scarce. Many effective protection systems exist in plants that allow them to perceive, respond to and appropriately adapt to a range of stress signals, and a variety of genes and gene products have been identified that involve responses to drought and high-salinity stress. In the past decade, a genetic model plant, Arabidopsis thaliana, has been widely used for unravelling the molecular basis of stress tolerance. The availability of knockout mutants and its suitability to allow genetic transformation proved the vital importance of Arabidopsis for assessing functions for individual stress-associated genes. In this review, the responses of plants to salt and water stress are described, the regulatory circuits, which allow plants to cope with stress, are presented and how the present knowledge can be applied to obtain tolerant plants is discussed.