Exopolysaccharides (EPS) of microbial origin with novel functionality, reproducible physico-chemical properties, are important class of polymeric materials. EPS are believed to protect bacterial cells from dessication, produce biofilms, thus enhancing the cells chances of bacterial colonizing special ecological niches. In rhizosphere, EPS are known to be useful to improve the moisture-holding capacity. Three Bacillus spp. strains identified by 16s rDNA sequence analysis as B. amyloliquefaciens strain HYD-B17; B. licheniformis strain HYTAPB18; B. subtilis strain RMPB44 were studied for the ability to tolerate matric stress and produce EPS under different water potentials. EPS production in all the three Bacillus spp strains increased with increasing water stress indicating correlation between drought stress tolerance and EPS production. Among the isolates, strain HYD-17 showed highest production of EPS. The exopolysaccharide composition of the three strains was further analyzed by HPLC. Drought stress influenced the ratio of sugars in EPS and glucose was found as major sugar in strains HYTAPB18 and RMPB44 whereas raffinose was major sugar found in strain HYD-B17. Inoculation of EPS producing Bacillus spp. strains in soil resulted in good soil aggregation under drought stress conditions at different incubation periods. This study shows that exposure to water stress conditions affects the composition and ratios of sugars in EPS produced by Bacillus spp. strains HYD-B17, HYTAPB18 and RMPB44 influencing abiotic stress tolerance of the microorganisms.