Ectoine, a novel natural osmoprotectant, protects bacteria living in extreme environments. This study aimed to explore the therapeutic effect of ectoine for dry eye disease. An experimental dry eye model was created in C57BL/6 mice exposed to desiccating stress (DS) with untreated mice as controls (UT). DS mice were dosed topically with 0.5–2.0% of ectoine or a vehicle control. Corneal epithelial defects were detected via corneal smoothness and Oregon Green dextran (OGD) fluorescent staining. Pro-inflammatory cytokines and chemokines were evaluated using RT-qPCR and immunofluorescent staining. Compared with UT mice, corneal epithelial defects were observed as corneal smoothness irregularities and strong punctate OGD fluorescent staining in DS mice with vehicle. Ectoine treatment protected DS mice from corneal damage in a concentration-dependent manner, and ectoine at 1.0 and 2.0% significantly restored the corneal smoothness and reduced OGD staining to near normal levels. Expression of pro-inflammatory cytokines (TNF-α, IL-1β, and IL-6) and chemokines CCL3 and CXCL11 was significantly elevated in the corneas and conjunctivas of DS mice, whereas 1.0 and 2.0% ectoine suppressed these inflammatory mediators to near normal levels. Our findings demonstrate that ectoine can significantly reduce the hallmark pathologies associated with dry eye and may be a promising candidate for treating human disease.