Drought stress as the most important abiotic stress plays an important role in the yield reduction of crop plants worldwide. For improvement of complex traits such as yield possessing low heritability, indirect selection is applied using other traits viz morph-physiological traits. The study of physiological response of different lines to water stress could be beneficial in understanding of the mechanisms of drought resistance. Therefore this study was conducted to evaluate the effect of water stress on the morphological, physiological and grain quality of 169 recombinant inbred lines (RILs) in wheat ( Triticum aestivum ), using two separate lattice design (drought and control) at Research Farm of Isfahan University of Technology. Two moisture regimes of 70 and 130 mm evaporation from evaporation pan class A (16% and 12% moisture by weight of soil, respectively) were used. Drought stress reduced the chlorophyll content (a, b, a+b), leaf width, leaf length, peduncle length, plant height, flag leaf area while increased proline content. Although drought stress increased the proline content of leaves and reduced peduncle length and flag leaf area in both sensitive and tolerant lines, tolerant lines have been less affected than sensitive lines. Results of analysis of variance revealed significant differences among lines for most of studied traits under normal conditions with the exception of proline content, flag leaf area and plant height. Under moisture stress conditions, the RILs significantly differed for the studied traits with the exception of flag leaf area. The results of combined analysis of variance showed that the traits were significantly affected by water stress with the exception of leaf area. The correlation coefficients revealed that traits related with proline content, leaf width, leaf length, peduncle length, plant height and flag leaf area had positive effect on grain yield, under moisture stress. Under similar conditions, carbohydrate and grain ash contents had significant and negative correlation with protein content, Water absorption, grain hardness, Zeleny sedimentation volume and bread volume correlated positive and significantly with protein content. Proline content had significant and positive correlation with grain yield. The results of factor analysis indicated 9 and 8 factors explaining 91.84% and 96.88% of total variation of yields under normal and stress conditions, respectively. The results of stepwise regression showed that leaf width, test weight, protein content and peduncle length contributed in 35% of observed variation for grain yield under normal conditions. Under stress conditions test weight, protein content, grain ash, grain moisture, chlorophyl a content, plant height and flag leaf area contributed in 48% of observed variation for grain yield. According to the results of present study drought tolerant RILs possessing desirable grain quality can be used to improve wheat.