Scarcity of water for irrigation is an alarming issue limiting crop production worldwide and is becoming increasingly severe with the passage of time in Pakistan. Rice production in Pakistan is thus, being adversely hampered by the shortage of water. The study was therefore, contemplated to determine the effect of drought stress on some physiological and agronomic parameters of three rice cultivars naming Basmati-Super, Shaheen-Basmati and Basmati-385. The field experiment was laid out in split plot design with randomized complete block arrangement, keeping cultivars in main and water stress stages viz; panicle initiation, anthesis and grain filling along with control in sub-plots. Cultivar Shaheen-Basmati exhibited comparatively more tolerance to drought stress at all the three growth stages under study with less reduction in various physiological and agronomic traits. Similarly, less increase in transpiration rate and sterile tillers per hill were observed in Shaheen-Basmati under drought stress at all the three stages.  Growth stage panicle initiation was the most sensitive one exhibiting more adverse effects on all the physiological and agronomic parameters under study., PAR, photosynthetic rate, RWC and stomatal conductance showed strong and positive correlation with WUE whereas; transpiration rate expressed negative correlation with WUE. Similarly, all the physiological and yield components under study except transpiration rate and number of sterile grains per panicle had a strong and positive correlation with paddy yield.