Reactive oxygen species and redox signaling undergo synergistic and antagonistic interactions with phytohormones to regulate protective responses of plants against biotic and abiotic stresses. However, molecular insight into the nature of this crosstalk remains scarce. We demonstrate that the hydrogen peroxide-responsive UDP-glucosyltransferase UGT74E2 of Arabidopsis thaliana is involved in the modulation of plant architecture and water stress response through its activity toward the auxin indole-3-butyric acid (IBA). Biochemical characterization of recombinant UGT74E2 demonstrated that it strongly favors IBA as a substrate. Assessment of indole-3-acetic acid (IAA), IBA, and their conjugates in transgenic plants ectopically expressing UGT74E2 indicated that the catalytic specificity was maintained in planta. In these transgenic plants, not only were IBA-Glc concentrations increased, but also free IBA levels were elevated and the conjugated IAA pattern was modified. This perturbed IBA and IAA homeostasis was associated with architectural changes, including increased shoot branching and altered rosette shape, and resulted in significantly improved survival during drought and salt stress treatments. Hence, our results reveal that IBA and IBA-Glc are important regulators of morphological and physiological stress adaptation mechanisms and provide molecular evidence for the interplay between hydrogen peroxide and auxin homeostasis through the action of an IBA UGT.