In order to monitor heterosis, inheritance and interrelationship among morpho-physiological and yield characters in sunflower, half diallel crosses among seven genetically divergent inbred lines were evaluated under adequate water supply, moderate and severe stress. Drought sensitivity index indicated that the parental sunflower genotypes L38 and L990 and the F₁ crosses L38 x L990and L350 x L460 were more tolerant to water stress, whereas L11 and L235 and the F₁ cross L11 x L990 classified as sensitive one. Cross combination L38 x L350 scored desired and significant heterosis for leaf chlorophyll content at moderate stress; transpiration rate at severe stress; achene yield/plant and achene oil content at adequate water supply and moderate stress. Additive gene action had a great role in controlling transpiration rate, plant height and achene oil content, while dominance was important in controlling achene yield/plant under the three levels of water regimes. The environmental variance had significant effect on gene expression of physiological and yield characters in most cases. Narrow sense heritability was high (>50%) for transpiration rate and low (< 30%) for achene yield/plant under the three levels of water regimes. Significant positive correlations were registered between achene yield/plant and each of leaf water content, transpiration rate, plant height, head diameter and 100-achene weight across three environments. The maximum direct effect on achene yield/plant was accounted for transpiration rate and plant height with values of 12.941% and 12.219%, respectively. The highest indirect effects on achene yield/plant variation were observed for transpiration rate via plant height followed by transpiration rate via 100-achene weight; leaf water content via 100-achene weight with values of  8.442%, 5.530% and 4.579%, respectively across three environments.