Abstract Drought stress severely limits plant development and leads to major agricultural losses. A complex set of regulatory mechanisms precisely regulates growth, development, and stress response in plants. In this study, we identified an APETALA2/ethylene responsive factor (AP2/ERF) transcription factor, ERF026, induced in response to mannitol stress in alfalfa (Medicago sativa L.). Silencing of ERF026 caused a decrease in the content of endogenous jasmonic acid (JA) and its derivatives in M. sativa, which induced changes in plant and leaf traits. These changes could be restored by exogenous application of low concentrations of JA. Transcriptome analysis demonstrated that differentially-expressed genes were primarily enriched in metabolic signaling pathways. Combined with the metabolomic data, we found that ERF026 was key in regulating flavonoid and isoflavonoid metabolism, as well as linolenic acid and JA metabolism. ERF026 binds to Stress Response Element (STRE) motifs (preferentially AGGGGG) to directly regulate the expression of AOC, OPR, OPCL1, and MYC2-like genes. Silencing of ERF026 also enhanced the drought tolerance of alfalfa by enhancing its antioxidant capacity and decreasing water dissipation, with ERF026 functioning as a JA promoter involved in the drought stress response of the plant. Our study reveals that ERF026 plays a key role as a transcription factor in balancing growth, development, and drought stress responses in M. sativa.