Cyclophilin 18‐2 (CYP18‐2) genes, homologues of human peptidyl‐prolyl isomerase‐like 1 (PPiL1), are conserved across multicellular organisms and Schizosaccharomyces pombe. Although PPiL1 is known to interact with ski‐interacting protein (SKIP), a transcriptional co‐regulator and spliceosomal component, there have been no functional analyses of PPiL1 homologues in plants. Rice cyclophilin 18‐2 (OsCYP18‐2) bound directly to amino acids 56–95 of OsSKIP and its binding was independent of cyclosporin A, a cyclophilin‐binding drug. Moreover, OsCYP18‐2 exhibited PPIase activity regardless of its interaction with OsSKIP. Therefore, the binding site for OsCYP18‐2's interaction with SKIP was distinct from the PPIase active site. OsCYP18‐2's interaction with SKIP full‐length protein enabled OsCYP18‐2's translocation from the cytoplasm into the nucleus and AtSKIP interacted in planta with both AtCYP18‐2 and OsCYP18‐2. Drought and salt stress induced similar expression of OsCYP18‐2 and OsSKIP. Overexpression of OsCYP18‐2 in transgenic rice and Arabidopsis thaliana plants enhanced drought tolerance and altered expression and pre‐mRNA splicing patterns of stress‐related genes in Arabidopsis under drought conditions. Furthermore, OsCYP18‐2 caused transcriptional activation with/without OsSKIP in the GAL4 system of yeast; thus the OsSKIP‐OsCYP18‐2 interaction has an important role in the transcriptional and post‐transcriptional regulation of stress‐related genes and increases tolerance to drought stress.