As a type of abiotic stress, drought limits plant growth and productivity. The increased demand for the valuable essential oil extracted from geranium (Pelargonium graveolens L.) is mainly regulated by plant growth, which is adversely affected by drought. Melatonin (MT) has been used to enhance plant growth under various abiotic stresses, although its impact on overcoming drought stress in aromatic plants, including geranium, has not yet been investigated. In the current investigation, MT at 100 µM was applied at 100% (well-watered) or 50% (drought stress) field capacity to verify the role of MT in geranium under drought stress. Drought stress markedly reduced growth parameters, herb yield, and total chlorophyll content; however, MT alleviated these effects. The herb yield of the stressed plants was reduced by 59.91% compared to the unstressed plants, while this reduction was only 14.38% when MT was applied. In contrast, drought enhanced the essential oil percentage in geranium leaves. Despite the reduction in oil yield caused by drought, MT application mitigated this reduction and improved both oil yield and oil components. Moreover, the MT treatment enhanced the accumulation of total phenols, glutathione, and proline and improved the activity of ascorbate peroxidase, catalase, and glutathione reductase, resulting in the alleviation of drought-induced oxidative damage. Consequently, MT reduced both hydrogen peroxide and malondialdehyde accumulation by 71.11 and 48.30%, respectively, under drought, thereby maintaining the cellular structures’ integrity. Overall, this is the first report that reveals the ability of MT application to improve geranium oil yield and resistance to drought by enhancing the antioxidant defense system. The results enrich awareness regarding the potential benefits of the external application of MT and its roles that can help researchers to improve aromatic plants’ performance and productivity under drought stress.