Homeobox (HB) transcription factors have been reported to regulate various developmental processes and hormone signaling and mediate plant adaption to abiotic stresses, including drought. As a major subfamily of HB family, KNOX genes have been widely studied in herbaceous plants. However, the behaviors of KNOX genes in regulating plant developmental processes and stress resistance in woody plants remain poorly understood. Here, we found a KNOX family gene in the model tree species Populus trichocarpa (hereafter “poplar”), PtHB180, which enhances drought tolerance by regulating developmental processes through auxin and gibberellin pathways and mediating the ABA signaling pathway leading to rapid stomatal closure. Overexpression lines of PtHB180 (PtHB180-OE) displayed pleiotropic phenotypes, including increased plant height and decreased leaf area by affecting auxin and/or gibberellin contents and signaling. PtHB180-OE plants also displayed improved drought tolerance under short- and long-term drought stress. Results of transcriptome sequencing suggested the involvement of genes related to ABA signaling in regulating drought tolerance in PtHB180-OE. Specifically, PtHB180-OE plants showed significantly enhanced stomatal sensitivity to exogenous ABA. Taken together, our results indicate that PtHB180 enhances drought tolerance in poplar via regulating plant architecture and mediating ABA signaling to close stomata. Therefore, PtHB180 can be used as a potential candidate gene to improve drought tolerance by genetic transformation in poplar and related plant species.