Drought stress severely limits plant growth and productivity, yet the molecular basis of drought tolerance and post-drought recovery remains incompletely understood in many forage legumes. Medicago ruthenica is a perennial legume native to arid and cold regions and exhibits strong drought resilience. Results: We integrated key physiological traits related to stomatal regulation, photosynthesis, osmotic adjustment and antioxidant defense with RNA-seq across four stages (well-watered control, CK; drought for 9 days, D9; drought for 12 days, D12; and rewatering for 4 days, RW). Drought triggered stage-dependent physiological shifts, and transcriptome profiling identified >3000 drought- and rewatering-responsive genes enriched in primary metabolism, redox homeostasis and hormone signaling. WGCNA highlighted two drought-associated modules (MEcyan and MEcoral1) and prioritized three hub transcription factors for functional validation: 861 (AP2/ERF), 22 (WRKY) and 89 (bZIP). Overexpression of each gene in tobacco improved drought tolerance, as indicated by enhanced growth/root traits, increased osmolyte accumulation and antioxidant enzyme activities, and reduced membrane damage. Conclusions: Together, these results provide an integrated view of drought stress response and recovery in M. ruthenica and identify 861, 22 and 89 as candidate regulatory genes for engineering drought resilience in legumes.