Previous work on a number of transgenics having mtlD has esablished the role of mannitol accumulation in the alleviation of abiotic stresses like salinity and drought. In the present study we have characterized the peanut (cv. GG 20) plants transformed with mtlD (from Escherichia coli) for its tolerance to abiotic stresses. Salinity and water-deficit stress tolerance were evaluated using different physio-biochemical and growth parameters in transgenic and wild-type plants both at seedling and full-growth stage. Here we demonstrate that biosynthesis of mannitol in transgenic peanut lines due to the over-expression of mtlD gene improves its tolerance for salinity and water-deficit stress over WT. This was revealed by better growth and physio-biochemical parameters like mannitol content, proline levels, total chlorophyll content, osmotic potential, electrolytic leakage and relative water content in transgenics over WT. It is concluded that the better performance of mannitol-synthesizing transgenic plants was due to the stress-shielding role of mannitol. However we are not ruling out the possibility of induction of a series of signal- transductions in transgenic plants in response to the mtlD expression, which may activate other protective reactions against salinity and drought stresses.