Drought decreases the inorganic phosphate (Pi) supply of soil, resulting in Pi starvation of plants, but the molecular mechanism of how plants, especially the perennial trees, are tolerant to drought stress and Pi starvation, is still elusive. In this study, we identified an AP2/ERF transcription factor gene, PalERF2, from Populus alba var. pyramidalis, and it was induced by both mannitol treatment and Pi starvation. Overexpressing and knocking-down of PalERF2 both enhanced and attenuated tolerance to drought stress and Pi deficiency compared to WT, respectively. Moreover, the overexpression of PalERF2 up-regulated the expression levels of Pi starvation-induced (PSI) genes and increased Pi uptake under drought conditions; however, its RNAi poplar showed the opposite phenotypes. Subsequent analysis indicated that PalERF2 directly modulated expressions of drought-responsive genes PalRD20 and PalSAG113, as well as PSI genes PalPHL2 and PalPHT1;4, through binding to the DRE motifs on their promoters. These results clearly indicate that poplars can recruit PalERF2 to increase the tolerance to drought and also elevate Pi uptake under drought stress