Understanding drought-tolerance mechanisms and identifying genetic dominance are important for crop improvement. Setaria italica, which is extremely drought-tolerant, has been regarded as a model plant for studying stress biology. Moreover, different genotypes of S. italica have evolved various drought-tolerance/avoidance mechanisms that should be elucidated. Physiological and transcriptomic comparisons between drought-tolerant S. italica cultivar 'Yugu1' and drought-sensitive 'An04' were conducted. 'An04' had higher yields and more efficient photosystem activities than 'Yugu1' under well-watered conditions, and this was accompanied by positive brassinosteroid regulatory actions. However, 'An04's growth advantage was severely repressed by drought, while 'Yugu1' maintained normal growth under a water deficiency. High-throughput sequencing suggested that the S. italica transcriptome was severely remodelled by genotype × environment interactions. Expression profiles of genes related to phytohormone metabolism and signalling, transcription factors, detoxification, and other stress-related proteins were characterised, revealing genotype-dependent and -independent drought responses in different S. italica genotypes. Combining our data with drought-tolerance-related QTLs, we identified 20 candidate genes that contributed to germination and early seedling' drought tolerance in S. italica. Our analysis provides a comprehensive picture of how different S. italica genotypes respond to drought, and may be used for the genetic improvement of drought tolerance in Poaceae crops.