In a genetic screen for Arabidopsis mutants displaying pleiotropic alterations in vegetative development and stress responses we have identified a T-DNA insertion mutation in the Cap Binding Protein 20 (CBP20) gene, that encodes the 20kDa subunit of the nuclear mRNA cap binding complex (nCBC). Plants homozygous for the recessive cbp20 mutation show mild developmental abnormalities, such as serrated rosette leaves, delayed development and slightly reduced stature. Loss of the cbp20 function also confers hypersensitivity to abscisic acid during germination, significant reduction of stomatal conductance and greatly enhanced tolerance to drought. Expression of the wild type cDNA by CaMV35S promoter provides full genetic complementation of the pleiotropic cbp20 phenotype. Phenotypic characteristics of the cbp20 mutant are very similar to those of recently described abh1 mutant that is defective in the 80kDa subunit of nCBC. Our data thus confirm that both genes are dedicated to the same function. CBP20 provides a new target for breeding efforts that aim at the improvement of drought tolerance in plants. Our results also show that screening for pleiotropic phenotypes in mutant plant populations may be a fruitful strategy to isolate genes for agronomically important traits.