Neolitsea sericea is acclimated to arid islands, but few studies have examined its responses to water stress. To look into the defending responses that assist N. sericea seedlings to survive drought, physiological and transcriptomic analysis of leaves was conducted after drought was induced. Over 17,768,244 reads for each sample were generated, totalling over 4400 million base pairs (bp). Among 129,239 unigenes that were assembly yielded with an average length of 816 bp, 51,137 of them (39.6%) were annotated successfully. Under severe drought, physiological inhibition was strengthened and abscisic acid content was significantly upregulated. The responses were strongly accompanied by transcriptional regulation of genes participating in stress perception, protective signalling, hormone metabolism, transcription factors, abiotic stress, transport, and degradation. In total, 61, 65, and 67 differentially expressed genes were identified after 12, 24, and 72 h exposure to severe drought stress, respectively. Gene Ontology and MapMan functional enrichment analysis revealed that the most upregulated genes were involved in protein transport, the regulation of transcription, and miscellaneous enzyme families. In addition, genes that encode glycosyl transferase and UDP-glycosyltransferases may modulate the drought-stress responses of N. sericea. Multiple hormones were active in N. sericea leaves during drought stress, including those associated with auxins, abscisic acid, brassinosteroid, and cytokinins. Transcription factors, including AtbHLH112, AtCOL4, AtZFP3, AtCIR1, and AtCCA1, may participate in ABA signal transduction in drought-treated N. sericea. The present study elucidates how N. sericea make transcriptomic responses to drought stress, helping to reveal the molecular mechanisms connected to drought adaptation.