'Early responsive to dehydration' (ERD) genes are a group of plant genes having functional roles in plant stress tolerance and development. In this study, we have isolated and characterized a Brassica juncea 'ERD' gene (BjERD4) which encodes a novel RNA binding protein. The expression pattern of ERD4 analyzed under different stress conditions showed that transcript levels were increased with dehydration, sodium chloride, low temperature, heat, abscisic acid and salicylic acid treatments. The BjERD4 was found to be localized in the chloroplasts as revealed by Confocal microscopy studies. To study the function, transgenic Arabidopsis plants were generated and analyzed for various morphological and physiological parameters. The overexpressing transgenic lines showed significant increase in number of leaves with more leaf area and larger siliques as compared to wild type plants, whereas RNAi:ERD4 transgenic lines showed reduced leaf number, leaf area, dwarf phenotype and delayed seed germination. Transgenic Arabidopsis plants overexpressing BjERD4 gene also exhibited enhanced tolerance to dehydration and salt stresses, while the knockdown lines were susceptible as compared to wild type plants under similar stress conditions. It was observed that BjERD4 protein could bind RNA as evidenced by the gel-shift assay. The overall results of transcript analysis, RNA gel-shift assay, and transgenic expression, for the first time, show that the BjERD4 is involved in abiotic stress tolerance besides offering new clues about the possible roles of BjERD4 in plant growth and development.