Sixty sunflower accessions were evaluated under Polyethylene glycol (PEG-6000) mediated drought stress. Selected tolerant and sensitive accessions were crossed in Line ´ Tester fashion and resultant F1 along with their parents were evaluated for drought tolerance in field and PEG mediated drought in lab. Data were recorded on morphological and physiological parameters to estimate genetic variability, general and specific combining ability effects, heterosis manifestation, gene action, correlation and path analyses. Genetic variation among the entries under normal and drought stress treatments, indicated that this breeding material may be used for the development of drought tolerant types. Combining ability analysis exhibited variable direction and magnitude of general combining (GCA) effects among line and testers and specific combining ability effects (SCA) among crosses. The lines A-23, G-33 and 017583 and testers HA-133 and 017577 were best general combiners under normal and drought stress treatments. Results of SCA indicated that crosses G G-61 × 017577, A-79 × CM-621, A-48 × CM-621, 017592 × CM-621, 017592 × 017577, 017566 × HA-341, G-33 × CM-621, G-33 × HA-342, A-79 × HA-133, 017592 × HA-124, A-48 × HA-341, A-48 × HA-342, G-61 × CM-621, HBRS-1 × 017577, A-23 × CM-621, 017566 × HA-124 and A-75 × 017577 were best specific combiners. Crosses G-61 × HA-124 and A-48 × HA-341 had also mid parent, better parent and commercial heterosis for various traits under treatments. Additive type of gene action was observed for germination percentage, days to 50% flowering, days to 50% maturity, stem diameter and oil content while other traits showing non-additive gene action. Association of traits based on correlation and path analyses suggested that seedling fresh weight, dry weight and hundred achene weight might be used as criteria for selection of sunflower for drought tolerance and high achene yield.