As one way to approach to cold defense mechanism in plants, we previously identified the gene for protein-tyrosine phosphatase (CaTPP1) from hot pepper (Capsicum annuum) using cDNA microarray analysis coupled with Northern blot analysis. We showed that the CaTPP1 gene was strongly induced by cold, drought, salt and ABA stresses. The CaTPP1 gene was engineered under control of CaMV 35S promoter for constitutive expression in transgenic tobacco plants by Agrobacterium-mediated transformation. The resulting CaTPP1 transgenic tobacco plants showed significantly increased cold stress resistance. It also appeared that some of the transgenic tobacco plants showed increased drought tolerance. The CaTPP1 transgenic plants showed no visible phenotypic alteration compared to wild type plants. These results showed the involvement of protein tyrosine phosphatase in tolerance of abiotic stresses including cold and drought stress.