Experiments were conducted to study the genetics and combining ability for yield and its components under irrigated (E I) and water stress environments (E II) using F1 hybrids derived from a full diallel mating involving four drought tolerant and four drought sensitive rice genotypes. Significant differences were observed for all the traits studied in both EI and EII environments, except harvest index in E II. Additive and non-additive gene actions for days to flowering, biomass and harvest index and nonadditive gene action for grain yield in both the environments were observed. Importance of additive gene action in E I and non-additive gene action in E II was observed for grains panicle–1, whereas shift in non-additive to additive from E I to E II was observed for productive tillers plant−1. The significance of gca and gca x environment interaction indicated the differential contribution of parents for days to flowering, biomass and harvest index. Based on the mean values and gca effects, landraces Nootripathu and Norungan were adjudged as the potential parents to improve grain yield under stress, where as CO43 and IR62266 were identified as good general combiners to improve grain yield and its component traits under irrigated environment. The hybrids viz., PMK2/CO43, CO43/Nootripathu, Nootripathu/Kallurundaikar, Norungan/IR64, Kallurundaikar x PMK2 and IR20 x IR62266 were identified as superior ones for improving yield under water stress.