Drought is one of the most common stresses experienced by plants and limits plant growth throughout the world, especially in the arid and semi-arid areas. In this research, the effect of vermicompost on olive (Olea europaea L. cv. Zard) morpho-physiological traits and drought tolerance was investigated. A factorial experiment was conducted in completely randomized design with two factors, including vermicompost application at four levels (0, 12.5%, 25% and 50%) and drought stress at two levels (full irrigation and non-irrigation) and 4 replications in the research greenhouse of the Department of Horticulture, Isfahan University of Technology, Isfahan, Iran. Drought stress decreased relative leaf number, but addition of vermicompost increased it. Drought stress decreased the relative water content, chlorophyll a, b, carotenoids, and root P concentrations and increased leaf and root Na concentration, and application of vermicompost significantly decreased Na concentration of the roots. In spite of positive effects of all vermicompost levels on growth parameters and drought tolerance, the highest number of leaves, chlorophyll a, b and carotenoid concentrations and drought tolerance was observed in plants fertilized with 25% vermicompost. The results showed that applying 25% vermicompost to the soil led to improvements in an array of plant growth parameters and K and P concentrations of the roots, due presumably to an improvement in physical and chemical properties of the medium.