Drought stress as the most important abiotic stress plays an important role in yield of plants worldwide. This study was conducted to evaluate drought tolerance of 75 tall fescue genotypes ( Festuca arundinaceae) based on morphological, physiological and seed production traits at research farm of college of agriculture, Isfahan university of technology located at lavark-Najafabad during 2011 and 2012. The genotypes consisted of 25 parental lines along with their two sets of 25 progenies selected based on contrasting maturity date (early and late). These three sets of genotypes were evaluated under moisture stress and non-stress according to a split design. Results showed that drought stress significantly affected all the measured seed traits except for days to ear emergence and days to pollination. The three sets differed significantly except for two traits (panicle length and the number of seeds per plant). There were significant differences among 75 genotypes for all of the measured seed traits as well as forage production and morphological traits indicated a broad genetic diversity in this germplasm. Factor analysis for all of the traits revealed five factors under non-stress and stress condition which justified more than 80 percent of the total variation. The results of stepwise regression showed that number of grains per panicle, the number of fertile spikes and weight of thousand grain contributed in 90% of observed variation for grain yield under non stress condition. Under stress the same traits contributed in 88% of the observed variation for grain yield. Path coefficient analysis showed that the number of fertile spikes per plant had the most direct effect on seed yield under both moisture environments. Analysis of variance of drought tolerance and susceptibility indices based on seed yield under stress and non stress condition showed that there were significant differences among all indices indicating that these indices can be used for selection of tolerant genotypes. Among the calculated indices stress tolerance index (STI) and geometric mean productivity (GMP) were identified as the superior indices for selection of drought tolerant genotypes under field condition. According to the results of present study, it is concluded that the genotype number 3 from early set and genotype number 15 from parental set (both native to Iran) had high forage and seed yield and more drought tolerance which can be used for future breeding programs to develop superior varieties for arid region.