Background: As a typical xerophyte, H. halodendron can not only grow in desert sandy areas but also serves as an excellent nectar source and ornamental plant. However, research on its molecular and physiological mechanisms underlying drought tolerance remains limited. Methods: This study systematically investigated its drought resistance characteristics by integrating physiological parameters and Illumina transcriptome sequencing, and further validated key genes involved in the drought resistance mechanisms. Results: A total of 46,305 functional genes were identified, among which 6561 were differentially expressed genes (DEGs). These DEGs were significantly enriched in chloroplast function, photosynthesis, proline biosynthesis, and peroxidase activity. Under drought stress, the net photosynthetic rate, stomatal conductance, chlorophyll content, and transpiration rate decreased. Under severe drought conditions, only 5 out of 80 photosynthesis-related DEGs were up-regulated, while the rest were down-regulated, indicating that reduced chlorophyll content impaired light absorption, carbon reactions, and photosynthetic efficiency. Additionally, the contents of proline, soluble sugars, and soluble proteins, as well as the activities of superoxide dismutase (SOD), catalase (CAT), and peroxidase (POD), increased. The identification of 35 osmotic regulation-related and 39 antioxidant enzyme-related DEGs suggests that H. halodendron enhances osmotic adjustment substance synthesis and reactive oxygen species (ROS) scavenging capacity to counteract osmotic stress. Conclusions: Physiological, biochemical and gene expression analyses under drought stress provide a basis for the study of the drought tolerance characteristics of H. halodendron, which is of great significance for ecological environment governance using H. halodendron.