Aquaporin (AQP) proteins serve important roles in regulating water movement across cellular membranes and affect plant responses to drought stress. The objective of this study was to characterize and examine functions of an AQP gene FaPIP2;1, isolated from a drought-tolerant perennial grass species tall fescue (Festuca arundinacea), for involvement in leaf dehydration status during water stress by overexpressing the gene in arabidopsis (Arabidopsis thaliana). FaPIP2;1 had characteristic transmembrane domains and Asn–Pro–Ala motifs and was similar to PIP2;1 in rice (Oryza sativa) and maize (Zea mays). Quantitative real-time reverse transcriptase polymerase chain reaction analysis showed that FaPIP2;1 was upregulated during moderate water stress (hydroponic culture, osmotic potential (ΨS) at −0.47 and −0.78 MPa) and the transcript level decreased as ΨS further decreased. Transgenic arabidopsis plants overexpressing FaPIP2;1 showed greater number of leaves per plant and improved survival rate compared with the wild type (WT) during drought stress. Transgenic plants also maintained higher leaf relative water content (RWC), chlorophyll content (Chl), net photosynthetic rate (Pn), and lower leaf electrolyte leakage (EL) than the WT. However, there was no difference in root length between the transgenic and WT plants following drought stress. The results demonstrated that overexpressing FaPIP2;1 could improve plant tolerance to drought stress by enhancing leaf water status, Chl, and photosynthetic rate, as well as maintaining improved cellular membrane stability relative to the WT plants. FaPIP2;1 may be used as a candidate gene for genetic modification of perennial grasses to develop new drought-tolerant germplasm and cultivars.