Cotton, a strategic and economically vital fiber crop, holds a unique position in global agriculture, particularly in Iran. As a glycophyte, cotton demonstrates relatively higher tolerance to abiotic stresses than many other major crops; however, extreme environmental conditions, particularly drought, markedly impact the growth, productivity, and quality of cotton fibers. Thus, identifying resilient cultivars suited to arid and semi-arid regions has become a crucial objective for breeders to mitigate yield and quality losses. Consequently, research efforts have been intensified to elucidate the mechanisms underpinning cotton’s drought adaptation. In this review, we delineate the critical morphological (reduction of cell growth, development of the plant root system, and the effect of drought stress on fiber development, the relationship between source and sink, fruiting branches, and the reproductive system), physiological (stomatal regulation, reduced photosynthesis, osmotic balance, abscisic acid, jasmonic acid, reactive oxygen species), and molecular responses (activation of drought response signaling pathways, transcription factors, and stress-responsive genes) of cotton to drought stress. Additionally, we review strategies by which breeders can improve drought tolerance in cotton, including the use of laser biostimulants, organic and inorganic supplements, the application of nanotechnology to combat drought stress, and genetic modification of cotton.