BACKGROUND: Development of transgenic rice overexpressing transcription factors involved in drought response has been previously reported to confer drought tolerance and therefore represents a means of crop improvement. We transformed lowland rice IR64 with OsTZF5, encoding a CCCH-tandem zinc finger protein, under the control of the rice LIP9 stress-inducible promoter and compared the drought response of transgenic lines and nulls to IR64 in successive screenhouse paddy and field trials up to the T6 generation. RESULTS: Compared to the well-watered conditions, the level of drought stress across experiments varied from a minimum of - 25 to - 75 kPa at a soil depth of 30 cm which reduced biomass by 30-55% and grain yield by 1-92%, presenting a range of drought severities. OsTZF5 transgenic lines showed high yield advantage under drought over IR64 in early generations, which was related to shorter time to flowering, lower shoot biomass and higher harvest index. However, the increases in values for yield and related traits in the transgenics became smaller over successive generations despite continued detection of drought-induced transgene expression as conferred by the LIP9 promoter. The decreased advantage of the transgenics over generations tended to coincide with increased levels of homozygosity. Background cleaning of the transgenic lines as well as introgression of the transgene into an IR64 line containing major-effect drought yield QTLs, which were evaluated starting at the BC3F1 and BC2F3 generation, respectively, did not result in consistently increased yield under drought as compared to the respective checks. CONCLUSIONS: Although we cannot conclusively explain the genetic factors behind the loss of yield advantage of the transgenics under drought across generations, our results help in distinguishing among potential drought tolerance mechanisms related to effectiveness of the transgenics, since early flowering and harvest index most closely reflected the levels of yield advantage in the transgenics across generations while reduced biomass did not.