In all organisms, transfer RNAs (tRNAs) undergo extensive post-transcriptional modifications. Although base modifications in the anticodon are known to alter decoding specificity or improve decoding accuracy, much less is known about the functional relevance of modifications in other positions of tRNAs. Here, we report the identification of an A-to-I tRNA editing enzyme that modifies the tRNA-Ala(AGC) in the model plant Arabidopsis thaliana. The enzyme is homologous to Tad1p, a yeast tRNA-specific adenosine deaminase, and it selectively deaminates the adenosine in the position 3′-adjacent to the anticodon (A37) to inosine. We show that the AtTAD1 protein is exclusively localized in the nucleus. The tad1 loss-of-function mutants isolated in Arabidopsis show normal accumulation of the tRNA-Ala(AGC), suggesting that the loss of the I37 modification does not affect tRNA stability. The tad1 knockout mutants display no discernible phenotype under standard growth conditions, but produce less biomass under environmental stress conditions. Our results provide the first evidence in support of a physiological relevance of the A37-to-I modification in eukaryotes.