Drought is a primary abiotic stress that inhibits rice (Oryza sativa L.) growth and development, and during the reproductive stage it has a negative impact on the rice seed-setting rate. This research study examined two rice lines, La-96 (drought sensitive) and La-163 (drought resistant), for drought stress treatment (with soil moisture at 20% for 7 days) and control (normal irrigation and kept soil moisture ≥40%). To elucidate the photosynthesis and molecular mechanisms underlying drought tolerance in rice, leaf photosynthetic traits and transcriptome sequencing were used to compare differences between two contrasting recombinant inbred lines (RIL) during drought and subsequent recovery at the booting stage. The rice line La-96 showed a significant decrease in seed-setting rate after being treated for seven days’ drought stress (from 86.64% to 22.75%), while La-163 was slightly affected (from 89.04% to 79.33%). The photosynthetic activities of both lines significantly decreased under the drought treatment, and these traits of La-163 recovered to a comparable level with the control after three days of rewatering. The transcriptome of both lines in three treatments (the control, drought stress, and subsequent recovery) were tested, and a total of 16,051 genes were identified, among which 10,566 genes were differentially expressed in various treatments and rice lines. Comprehensive gene expression profiles revealed that the specifically identified DEGs were involved in the ribosome synthesis and the metabolic pathway of photosynthesis, starch, and sucrose metabolism. The DEGs that are activated and respond quickly, as seen during recovery in the tolerant rice line, may play essential roles in regulating subsequent growth and development. This study uncovered the molecular genetic pathways of drought tolerance and extended our understanding of the drought tolerance mechanisms and subsequent recovery regulation in rice.