A diallel study was carried out during 1998 and 1999 applying the methodology of Hayman (1954) using eight cultivars of upland cotton and their 28 crosses. The objective of this work was to study the genetic components that control the inheritance of several physiological and agronomic characters under drought conditions. The field experiments were located in Seville, southern Spain under limited condition of water. The characters evaluated were: photosynthesis, transpiration, stomatal conductance, water use efficiency, leaf temperature, specific leaf weight, water content, seed cotton yield, boll number per plant, boll weight, fibre percentage and seed index. Relationships among traits were determined using Pearson`s simple correlation test. The genetic analyses showed the importance of the additive genetic variance in the inheritance of the characters such as photosynthesis, transpiration, stomatal conductance and water content and the importance of the additive and non additive genetic variance in the inheritance of yield, boll number per plant and boll weight.

The narrow sense heritability was very low for leaf temperature, specific leaf weight and water use efficiency, low for photosynthesis, transpiration, stomatal conductance and water content and medium for seed yield, bolls per plant and boll weight. The highest values for heritability were for fibre percentage.

With the exception of water use efficiency the majority of the physiological characters under consideration show significant correlations with yield and yield components, although seed index showed a low correlation with the majority of the physiological characters.

The presence of additive variance indicates the possibility of improving these characters, using selection methods which permit the accumulation of positive genes. The presence of dominance variance in the yield characters permits the opportunity to exploit the heterosis as an important tool under drought conditions. The cultivars Maria del Mar and Tashkent 9 seem to be good parentals for a breeding program under drought condition.