Oligo-chitosan (82.20 kDa) was prepared from chitosan (337.73 kDa) by application of 100 kGy γ-irradiation. UV-vis spectroscopy, FTIR, XRD, DSC and TGA analyses showed typical properties of chitosan with slight variations after γ-irradiation. Degree of deacetylation of chitosan and oligo-chitosan was 82%, while 1,1-diphenyl-2-picrylhydrzyl and 2,2'-azino-bis(3-ethylbenzothiazoline-6-sulphonic acid) radical scavenging activity were 10.01 ± 0.18 and 43.30 ± 3.75 μMTE/mL and 13.64 ± 0.16 and 79.93 ± 4.44 μMTE/mL, respectively. Chitosan and oligo-chitosan was applied as foliar spray on potato plants to analyze growth promoting and stress tolerance inducing effects. Improvement in shoot height and number of nodes was observed after foliar spray of chitosan and oligo-chitosan at 50-75 mg/L. Furthermore, membrane stability index and malondialdehyde reduced while chlorophyll, carotenoids, proline, reducing and total sugars, enhanced considerably. The antioxidant and defense enzymes CAT, POD, SOD, chitinase and chitosanase showed prominent increment. Overall results indicated that chitosan (75 mg/L) and oligo-chitosan (50 mg/L) can augment plant growth and induce defense mechanism for drought stress tolerance in potato.