The role of abscisic acid (ABA) receptors, PYR1/PYL/RCAR (PYLs), is well established in ABA signaling and plant drought response, but limited research has explored the regulation of wheat PYLs in this process, especially the effects of their allelic variations on drought tolerance or grain yield. Here, we found that overexpression of a TaABFs-regulated PYL gene, TaPYL1-1B, exhibited higher ABA sensitivity, photosynthetic capacity, and water-use efficiency (WUE), all contributed to higher drought tolerance than that of wild-type plants. This heightened water-saving mechanism further increased grain yield and protected productivity during water deficit. Candidate gene association analysis revealed that a favorable allele TaPYL1-1BIn-442, carrying an MYB recognition site insertion in the promoter, is targeted by TaMYB70 and confers enhanced expression of TaPYL1-1B in drought-tolerant genotypes. More importantly, an increase in frequency of the TaPYL1-1BIn-442 allele over decades among modern Chinese cultivars and its association with high thousand-kernel weight together demonstrated that it was artificially selected during wheat improvement efforts. Taken together, our findings illuminate the role of TaPYL1-1B plays in coordinating drought tolerance and grain yield. In particular, the allelic variant TaPYL1-1BIn-442 substantially contributes to enhanced drought tolerance while maintaining high yield, and thus represents a valuable genetic target for engineering drought-tolerant wheat germplasm.