The kernel ofTorreya grandiscv. ‘Merrillii’ (Cephalotaxaceae) is a rare nut with a variety of bioactive compounds and a high economic value. β-sitosterol is not only the most abundant plant sterol but also has various biological effects, such as antimicrobial, anticancer, anti-inflammatory, lipid-lowering, antioxidant, and antidiabetic activities. In this study, a squalene synthase gene fromT. grandis,TgSQS, was identified and functionally characterized.TgSQSencodes a deduced protein of 410 amino acids. Prokaryotic expression of the TgSQS protein could catalyze farnesyl diphosphate to produce squalene. TransgenicArabidopsisplants overexpressingTgSQSshowed a significant increase in the content of both squalene and β-sitosterol; moreover, their drought tolerance was also stronger than that of the wild type. Transcriptome data fromT. grandisseedlings showed that the expression levels of sterol biosynthesis pathway-related genes, such asHMGS,HMGR,MK,DXS,IPPI,FPPS,SQS, andDWF1, increased significantly after drought treatment. We also demonstrated that TgWRKY3 directly bound to theTgSQSpromoter region and regulated its expression through a yeast one-hybrid experiment and a dual luciferase experiment. Together, these findings demonstrate thatTgSQShas a positive role in β-sitosterol biosynthesis and in protecting against drought stress, emphasizing its importance as a metabolic engineering tool for the simultaneous improvement of β-sitosterol biosynthesis and drought tolerance.