Rice is the primary food source for more than half of the world's population, and since rice cultivation is dependent on water availability, drought during flowering severely affects grain yield. Here, we show that the function of a drought inducible receptor-like cytoplasmic kinase (RLCK), named GROWTH UNDER DROUGHT KINASE (GUDK), is required for grain yield under drought and well-watered conditions. Loss-of-function gudk mutant lines exhibit sensitivity to salinity, osmotic stress and ABA treatment at the seedling stage, and reduction in photosynthesis and plant biomass under controlled drought stress at the vegetative stage. The gudk mutants interestingly showed significant reduction in grain yield, both under normal well-watered conditions and under drought stress at the reproductive stage. Phosphoproteome profiling of the mutant followed by in vitro assays identified the AP2/ERF transcription factor OsAP37 as a phosphorylation target of GUDK. The involvement of OsAP37 in regulating grain yield under drought through activation of several stress genes has been shown previously (Oh et al., 2009). Our transactivation assays confirmed that GUDK is required for activation of stress genes by OsAP37. We propose that GUDK mediates drought stress signaling through phosphorylation and activation of OsAP37, resulting in transcriptional activation of stress regulated genes, which impart tolerance and improve yield under drought. Our study reveals new insights around drought stress signaling mediated by RLCKs, and also identifies a primary regulator of grain yield in rice that offers the opportunity to improve and stabilize rice grain yield under normal and drought stress conditions.