In this study we isolated and screened drought tolerant Pseudomonas isolates from arid and semi arid crop production systems of India. Five isolates could tolerate osmotic stress up to -0.73 MPa and possessed multiple PGP properties such as P-solubilization, production of phytohormones (IAA, GA and cytokinin), siderophores, ammonia and HCN however under osmotic stress expression of PGP traits was low compared to non-stressed conditions. The strains were identified as Pseudomonas entomophila, Pseudomonas stutzeri, Pseudomonas putida, Pseudomonas syringae and Pseudomonas monteilli respectively on the basis of 16S rRNA gene sequence analysis. Osmotic stress affected growth pattern of all the isolates as indicated by increased mean generation time. An increase level of intracellular free amino acids, proline, total soluble sugars and exopolysaccharides was observed under osmotic stress suggesting bacterial response to applied stress. Further, strains GAP-P45 and GRFHYTP52 showing higher levels of EPS and osmolytes (amino acids and proline) accumulation under stress as compared to non-stress conditions, also exhibited higher expression of PGP traits under stress indicating a relationship between stress response and expression of PGP traits. We conclude that isolation and screening of indigenous, stress adaptable strains possessing PGP traits can be a method for selection of efficient stress tolerant PGPR strains.