Olive trees are considered among the most resilient crops in Mediterranean basin. However, prolonged water stress may adversely affect plant productivity and quality of fruits and oil. Therefore, it is essential to design new agronomic strategies to improve plant water stress tolerance and secure yield and product stability of this important agricultural crop. Under water deficit, plants cope with serious threats, and melatonin (MEL), as a versatile signaling biomolecule, can play a crucial role in morphological and physiological modifications of plants able to enhance drought stress tolerance. In this view, the current research aimed at elucidating the potential beneficial role of exogenous foliar application of MEL (0 and 100 µM) to Sevillana and Roughani olive cultivars under different water stress levels (100%, 75%, and 50% ET). In particular, the morphological, physiological and biochemical changes occurring in leaves treated with or without MEL and the quality of fruits and oil were discussed. A decrease of electrolyte leakage (EL) and malondialdehyde (MDA) content as well as an increase of relative water content (RWC) in MEL-sprayed leaves of drought stress trees were observed. The application of MEL was also associated with higher K+ to Na+ ratio, Ca2+ content, phenolic and soluble carbohydrates contents and a lower decline chlorophyll (Chl) levels. MEL-treated leaves also showed higher catalase (CAT) and peroxidase (POD) activities, responsible for scavenging reactive oxygen species (ROS) generated during drought stress in a severity-dependent manner. MEL-foliar application enhanced the oil content and yield in the olive fruits in both cultivars compared to the untreated ones. Since MEL was also able to exert a beneficial effect on both Sevillana and Roughani cultivar trees by improving their crop water productivity (WPc) under water deficit, it can be considered an effective eco-friendly candidate to minimize the detrimental consequences of water stress.