Transcription factors play key roles in plant development and stress responses through their interaction with cis-elements and/or other transcription factors. Homeodomain associated leucine zipper proteins (HD-Zip) constitute a family of transcription factors that are characterized by the presence of a DNA-binding domain closely linked with leucine zipper motif functioning in dimer formation. This type of association is unique to plants and considered as an excellent candidate to activate developmental responses to altering environmental conditions. Cotton is the most important fiber plant with a lot of local and commercial uses in the world. HD-Zip proteins not only have key roles in different stages of vascular and inter-fascicular fiber differentiation of cotton but also are suggested to have an important role against abiotic stress that is one of the key factors limiting cotton productivity. Plants have developed various strategies to manage stress conditions through a combination of metabolic, physiological and morphological adaptations. These adaptive changes rely largely on alterations in gene expression. Therefore, transcriptional regulators play a crucial role in stress tolerance. Being a transcription factor HD-Zip might be a useful target for genetic engineering to generate multiple stress tolerance in susceptible plants. In the following chapter, we discussed how the HD-Zip proteins would play a useful role for cotton development both in fiber production and stress adaptation.