Transgenic tobacco (Nicotiana tabacum L. var. SR1) plants that over-express the Escherichia coli trehalose-6-phosphate synthase (TPS) gene (otsA) synthesized small amounts of trehalose $(<400{mu}g;g^{-1};leaf)$ while non-transform ants produced no detectable trehalose. Some transgenic plants expressing a high level of otsA exhibited stunted growth and morphologically altered leaves. We tested $F_2$ homozygous plants devoid of phenotypic changes to determine their physiological responses to dehydration and salinity stresses. All transgenic plants maintained better leaf turgidity under a limited water supply or after treatment with polyethylene glycol (PEG). Furthermore, fresh weight was maintained at higher levels after either treatment. The initial leaf water potential was higher in transgenic plants than non-transformants, but, in both plant types, was decreased to a comparable degree following dehydration. When grown with 250mM NaCl, transgenic plants exhibited a significant delay in leaf withering and chlorosis, as well as more efficient seed germination. Our results suggest that either trehalose or trehalose-6-phosphate can act as an osmoprotective molecule without maintaining water potential, in contrast to other osmolytes. Furthermore, both appear to protect young embryos under unfavorable water status to ensure subsequent germination.