PXY (Phloem intercalated with xylem) is a receptor kinase required for directional cell division during the development of plant vascular tissue. Drought stress usually affects plant stem cell division and differentiation thereby limiting plant growth. However, the role of PXY in cambial activities of woody plants under drought stress is unclear. In this study, we analyzed the biological functions of two PXY genes (PagPXYa and PagPXYb) in poplar growth and development and in response to drought stress in a hybrid poplar (Populus alba × P. glandulosa, ‘84K’). Expression analysis indicated that PagPXYs, similar to their orthologs PtrPXYs in Populus trichocarpa, are mainly expressed in the stem vascular system, and related to drought. Interestingly, overexpression of PagPXYa and PagPXYb in poplar did not have a significant impact on the growth status of transgenic plants under normal condition. However, when treated with 8 % PEG6000 or 100 mM H2O2, PagPXYa and PagPXYb overexpressing lines consistently exhibited more cambium cell layers, fewer xylem cell layers, and enhanced drought tolerance compared to the non-transgenic control ‘84K’. In addition, PagPXYs can alleviate the damage caused by H2O2 to the cambium under drought stress, thereby maintaining the cambial division activity of poplar under drought stress, indicating that PagPXYs play an important role in plant resistance to drought stress. This study provides a new insight for further research on the balance of growth and drought tolerance in forest trees.