Increasing drought resistance without sacrificing grain yield remains an ongoing challenge in crop improvement. In this study, we report that Oryza sativa CCCH-tandem zinc finger protein 5 (OsTZF5) can confer drought resistance and increase grain yield in transgenic rice plants. Expression of OsTZF5 was induced by abscisic acid, dehydration and cold stress. Upon stress, OsTZF5-GFP localized to the cytoplasm and cytoplasmic foci. Transgenic rice plants overexpressing OsTZF5 under the constitutive maize ubiquitin promoter exhibited improved survival under drought but also growth retardation. By introducing OsTZF5 behind the stress-responsive OsNAC6 promoter in two commercial upland cultivars, Curinga and NERICA4, we obtained transgenic plants that showed no growth retardation. Moreover, these plants exhibited significantly increased grain yield compared to non-transgenic cultivars in different confined field drought environments. Physiological analysis indicated that OsTZF5 promoted both drought tolerance and drought avoidance. Collectively, our results provide strong evidence that OsTZF5 is a useful biotechnological tool to minimize yield losses in rice grown under drought conditions.