Drought stress alters the production of volatile organic compounds such as monoterpenes, but their role in regulating plant stress responses is unclear. Wild-type (WT) tobacco plants that lack monoterpene production, and transgenic plants that upregulated (−)-limonene (LG12), myrcene (MG1), or (−)-α/β-pinene (PG11) production, were grown in different chambers (to avoid non-target monoterpene effects) and allowed to dry the soil. Drought initially increased monoterpene emissions, which subsequently declined with prolonged stress. Despite maintaining higher leaf water potential and turgor than WT plants, transgenic plants had lower biomass and leaf area. Although soil drying enhanced foliar hydrogen peroxide (H 2O 2) content and superoxide dismutase (SOD) activity similarly in all genotypes, (–)-limonene production downregulated ascorbate peroxidase (APX) activity, and increased malondialdehyde (MDA) and ABA concentrations under drought conditions compared to WT plants. Re-watering decreased oxidative damage within 24 hours, attenuated ABA concentrations and increased APX activity of LG12, and allowed similar seed production between genotypes. Monoterpene biosynthesis and emission modulate drought tolerance by affecting leaf water and oxidative status, but don’t alter photosynthetic processes. In species that naturally produce monoterpenes, understanding whether monoterpene biosynthesis and emission interact with native signalling pathways to regulate hormonal and antioxidant status seems warranted.