The potential for breeding Gossypium hirsutum L. for water stress tolerance was investigated in the present studies. For this purpose, a sample of 50 cotton cultivars was screened out in greenhouse at 20% field capacity. Water stress was applied for four weeks. The performance of 50 cultivars was compared using data on shoot and root lengths, relative water content, excised leaf water loss and relative cell injury in absolute terms, calculating drought susceptibility indices (DSI) and through biplot analysis. Cultivars showing low DSI were selected as water stress tolerant, and cultivars showing highest DSI were identified as susceptible to water stress. Biplot analysis of germplasm under study revealed genetic divergence for water stress tolerance. On the basis of these three measures, CIM-496, 149F, DPL-26, BOU-1724 and B-557 were found tolerant to moisture stress, whilst FH-1000, NF-801-2-37, MNH-129 and H-499 exhibited susceptibility to water stress. The remaining cultivars revealed variable responses to water stress when these three measures were studied. Many researchers had emphasized on root length and used it as reliable indicator of drought tolerance. Therefore data on root length in the present plant material under moistures deficit conditions was used to calculate broad sense heritability (40%), which seemed to be encouraging for plant breeders. Molecular characterization of selected cotton cultivars was done using simple sequence repeat (SSR) markers. Analysis of molecular data did not reveal significant differences in genome, indicating relatedness among the brief sample of germplasm. Results of screening revealed that working variability among germplasm was present and controlled by significant genetic component, which may be exploited through hybridization. Therefore, F1 crosses were developed in the field keeping stress tolerant cultivars as lines and susceptible as testers using line × tester technique. Genetic material was field-planted and 50% moisture stress was applied to examine responses measuring plant height, seed cotton yield, number of bolls, boll weight, lint percentage and fibre traits. The analysis of F1 and parental data revealed the presence of both additive and non additive genes controlling variation under both the water regimes (normal and 50% stress). However, non additive genetic effects were more pronounced under water stress, suggesting the presence of low heritability for all the traits. Lines and interaction term contributed more to expression of seed cotton yield, number of bolls and boll weight, whilst lint percentage and fibre length were largely determined by the lines. Tester parents significantly contributed to fibre fineness. Non additive variation for fibre and yield related traits suggests possibility of using this material for hybrid development, and best varietal combinations were identified for exploitation in drought hit areas.