Melatonin has recently emerged as a multifunctional biomolecule with promising aspects in plant stress tolerance. The present study examined the effects of foliar-sprayed melatonin (0, 100, and 200 μM) on growth and essential oil yield attributes of lemon verbena (Lippia citriodora) under water-shortage (mild, moderate and severe). Results revealed that melatonin minimized drought effects on lemon verbena, resulting in improved growth and essential oils yield. Drought impositions gradually and significantly reduced several growth parameters, such as plant height and biomass, whereas melatonin application revived the growth performance of lemon verbena. Melatonin protected the photosynthetic pigments and helped maintain the mineral balance at all levels of drought. Melatonin stimulated the accumulation of proline, soluble sugars and abscisic acid, which were positively correlated with a better preservation of leaf water status in drought-stressed plants. Melatonin also prevented oxidative damages by enhancing the superoxide dismutase, ascorbate peroxidase and catalase activities. Furthermore, increased levels of total phenolic compounds, chicoric acid, caffeic acid and chlorogenic acid, as well as ascorbate and total antioxidant capacity in melatonin-sprayed drought-stressed plants indicated that melatonin helped verbena plants to sustain antioxidant and medicinal properties during drought. Finally, melatonin treatments upheld the concentrations and yield of essential oils in the leaves of lemon verbena regardless of drought severities. These results provided new insights into melatonin-mediated drought tolerance in lemon verbena, and this strategy could be implemented for the successful cultivation of lemon verbena, and perhaps other medicinal plants, in drought-prone areas worldwide.