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Sugarcane transgenic overexpressing EaGly III from Erianthus arundinaceus showed enhanced water deficit stress tolerance. Methylglyoxal (MG), an α-ketoaldehyde formed from either glycolysis or TCA cycle, is capable of causing total cellular damage via the generation of reactive oxygen species (ROS), advanced glycation end products (AGEs) and nucleic acid degradation. Glyoxalase pathway is a ubiquitous pathway known for detoxification of MG, involving key enzymes glyoxalase I (Gly I) and glyoxalase II (Gly II). Recently, a novel and an additional enzyme in glyoxalase pathway, viz., glyoxalase III (Gly III), has been discovered which possesses DJ-1/PfpI domain recognized for detoxifying MG in a single step process without requirement of any coenzyme. In the present study, a Gly III gene isolated from Erianthus arundinaceus, a wild relative of sugarcane, overexpressed in commercially cultivated sugarcane hybrid Co 86032 was assessed for drought tolerance. Morphometric observations revealed that transgenic sugarcane overexpressing EaGly III acquired drought tolerance trait. Oxidative damage caused by triggering generation of ROS has been determined to be low in transgenic plants as compared to wild type (WT). Transgenics resulted in higher relative water content, chlorophyll content, gas exchange parameters, photosynthetic efficiency, proline content and soluble sugars upon water deficit stress. In addition, higher and stable level of superoxide dismutase and peroxidase activities were observed along with minimal lipid peroxidation during drought stress signifying the tolerance mechanism exhibited by transgenic events. There was no significant structural change observed in the root anatomy of transgenic plants. Altogether, EaGly III gene could be considered as a potential candidate for conferring water deficit stress tolerance for sugarcane and other agricultural crops.