Water shortage is one of the major limitations that affect plant growth and development, and consequently yield and such losses can be compensated through heterosis breeding. Wheat cultivars viz., TD-1, Kiran, Sarsabz, Moomal, SKD-1 and TJ-83 crossed in a 6 × 6 diallel mating design. The F1 hybrids and parental lines were sown in a randomized complete block design with factorial arrangement. Two irrigation treatments, non-stress and water stress at anthesis were applied during 2010 at Sindh Agriculture University, Tandojam, Pakistan. Water stress has considerable effect on yield and physiological traits that allowed determining the heterotic effects. The F1 hybrids i.e. TD-1 × TJ-83, Kiran × Sarsabz, Kiran × Moomal and Sarsabz × Moomal showed greater mid and high parent heterotic response under both environments for relative water content, leaf area, seeds spike-1, seed index, harvest index and yield plant-1. The hybrids with high heterosis for other traits revealed less heterosis for stomatal conductance, especially in water stress conditions and proved their drought tolerance. The better parent effects were higher in non-stress than stress suggested that if exploitation of hybrid vigor is feasible in wheat, the above hybrids would be the choice F1 hybrids to be grown in water-deficit conditions for higher yields.