Breeding rice for abiotic stress tolerance is very important objective for rice breeders. Significantly reduce in yield due to drought-stress in most world countries, especially suffering from water lace as well as Egypt. Evaluating combining ability effects would provide valuable information that can be used for developing new drought tolerant lines. This study was conducted at Sakha Agricultural Research Station during 2014 to 2016 rice growing seasons to determine combining ability and gene action for grain yield and other important traits to identify the superior varieties/parents and crosses under both drought and optimum conditions. Six F₁ hybrids were generated by crossing four rice genotypes in a half diallel mating scheme in addition to their six F₂ populations after self-pollination. The four populations (P₁, P₂, F₁ and F₂) for all the six crosses were evaluated in a replicated field trial under drought and normal conditions. Drought stress significantly decreased the mean values of all the studied traits for parents and their hybrids compared with the control condition. Significant differences were observed among parents and their hybrids for most traits under both research conditions. General combining ability (GCA) and specific combining ability (SCA) means squares were highly significant for grain yield and most traits under test environments. The non-additive gene action played an important role in the inheritance of most studied traits. The parental genotypes NERICA3 and NERICA4 appeared to be the best general combiners for earliness and grain yield. The cross combinations; Giza178×NERICA3; Giza178×NERICA4 and NERICA3×NERICA4 in both F₁ and their F₂ generations were distinguished as specific combiners for grain yield and other related traits under normal and drought conditions. These results emphasized by positive heterosis over high parents followed by high values of inbreeding depression. Hence, these hybrids would be valuable in rice breeding for improving grain yield under drought stress condition.