The HD-Zip proteins are important transcription factors participating in numerous physiological processes in plants. In this study, we identified a homeobox-leucine zipper gene from Medicago truncatula, designated MtHB2 by monitoring the expression profile of M. truncatula exposed to low temperature. A fusion protein of MtHB2 with green fluorescent protein showed localization of MtHB2 in the nucleus. To evaluate the role of MtHB2 in response to abiotic stresses, transgenic Arabidopsis plants were generated by expressing MtHB2, and the effects of abiotic stress on the transgenic and wild-type Arabidopsis plants were studied. Transgenic plants generated that constitutively expressed MtHB2 were more sensitive to drought, salt and freezing stresses than wild-type plants. The physiological mechanisms underlying the reduced tolerance of the transgenic plants to drought, salt and freezing stresses were investigated. Expression of MtHB2 in Arabidopsis resulted in the transgenic plants accumulating less amounts of Pro and soluble sugars and greater amounts of malondialdehyde (MDA) and H₂O₂ than their wild-type counterparts treated with and without abiotic stresses. The reduced accumulation of Pro and soluble sugars may account for the lower osmolality in the transgenic plants, thus rendering the osmo-regulation of the transgenic plants less effective, while the higher levels of MDA and H₂O₂ in the transgenic plants made the transgenic plants more susceptible to oxidative damage under the conditions of abiotic stress. These findings demonstrate that MtHB2 encodes a novel stress-responsive HD transcription factor that may play a negative role in regulation of abiotic stress response mechanisms.