Fiber productivity and quality of cotton are severely affected by abiotic stresses. In this study, we identified the role of GhADF1, an actin depolymerizing factor, in cotton response to drought stress. GhADF1 expression in cotton could be induced by PEG6000. GhADF1-RNAi transgenic cotton showed increased tolerance to drought stress during seed germination and seedling development as well as at the reproductive stage. In contrast, overexpression of GhADF1 led to a drought-sensitive phenotype in transgenic plants. GhADF1-RNAi plants produced an enlarged root system with longer primary roots, more lateral roots, increased root dry biomass, and increased cell size. In leaves of GhADF1-RNAi cotton, proline content and activities of reactive oxygen species-scavenging enzymes were increased following drought stress compared with those in wild type. GhADF1-RNAi lines showed higher water-use efficiency than the wild type, accompanied by reduced leaf stomatal density and conductance. GhADF1-RNAi cotton produced higher fiber yield in the field under both normal and drought conditions. Transcriptomic analyses identified 124 differentially expressed genes in leaves of GhADF1-RNAi lines compared with the wild type following drought treatment. Upregulated genes included those encoding transcription factors, protein kinases, heat shock proteins, and other proteins known to be involved in stress responses. We conclude that GhADF1 reduces the expression of abiotic stress-associated genes in cotton response to drought stress and may be a promising candidate gene for crop improvement by genetic manipulation.