Soil salinization is becoming a great threat that reduces crop productivity worldwide. In this study, we found that rice allantoate amidohydrolase (OsAAH) expression was significantly upregulated by salt stress, and its overexpression conferred salt tolerance at the seedling stage. Compared to wild type (WT), the contents of ureides (allantoin and allantoate) were significantly increased in Osaah mutants and reduced in OsAAH overexpression lines both before and after salt treatments. Exogenous allantoin significantly promoted salt tolerance in OsAAH overexpression, but not in Osaah mutants. Subcellular localization showed that OsAAH was also localized to the peroxisomes in addition to the previously reported endoplasmic reticulum (ER). The differential expression of peroxisome-related genes was identified between Osaah mutants and WT. Furthermore, the contents of H2O2 and malondialdehyde (MDA) were significantly accumulated in Osaah mutants and reduced in OsAAH overexpression lines. The activities of antioxidant enzymes were significantly reduced in Osaah mutants and enhanced in OsAAH overexpression under NaCl treatment. The transcription factor OsABI5 could directly bind to OsAAH promoter and activate OsAAH expression. Our findings reveal that OsAAH could be induced by salt stress through the activation of OsABI5 and then confer salt tolerance by enhancing the scavenging capacity of reactive oxygen species (ROS), which contributes to rice breeding in salt tolerance.