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Abstract: Recurrent droughts in arid and semi-arid regions are already rendering agricultural production, mainstay of subsistence livelihoods, uncertain. In order to mitigate the impact of drought, agricultural organizations must increase their capacity to adapt. Institutional adaptation refers to the creation of an effective, long-term government institution or set of institutions in charge of planning and policy, and its capacity to develop, revise, and execute drought policies. Using the Fars Agricultural Organization in Iran, as a case study, this paper explores the institutional capacities and capabilities, necessary to adapt to the drought conditions. The STAIR model was used as a conceptual tool, and the Bayesian network and Partial Least Squares (PLS) path modeling was applied to explain the mechanisms by which organizational capacities influence drought management. A survey of 309 randomly selected managers and specialists indicated serious weaknesses in the ability of the organization to apply adaptation strategies effectively. Analysis of the causal models illustrated that organizational culture and resources and infrastructure significantly influenced drought management performance. Moreover, managers and specialists perceived human resources and strategy, goals, and action plan, respectively, as the main drivers of institutional adaptation to drought conditions. Recommendations and implications for drought management policy are offered to increase organizational adaptation to drought and reduce the subsequent sufferings. [Copyright &y& Elsevier]