In drought prone areas of Ethiopia, maize is produced by small-scale farmers’ where
additional inputs are rarely applied. Although genetic tolerance is recommended for
moisture stress, there is limited information on drought-tolerant genotypes reaction to
variable environments. In this study, eight drought tolerant lines and their diallel crosses
were tested separately in randomized complete block design under normal and high plant densities that combined with well watered and drought stress to estimate performance, heterosis and combining ability for grain yield. Both types of genotypes gave highest grain yield under well watered high plant density. However, least performance of inbred lines and highest heterosis was recorded under drought stressed high density, which confirmed more stress tolerance of hybrids than their parents. Although the predominant role of non-additive effects was observed for grain yield in most environments, the highly significant GCA x E and SCA x E interactions shows that combining ability effects change with growing conditions. Moreover, the observed weak association between grain yield of hybrids and inbred lines per se suggested the importance of evaluation of crosses in variable environments. Some of the new crosses gave better yield than local hybrids in less stress and stress environments. Generally, this study confirmed that hybrids developed from drought-tolerant inbred lines combined stress tolerance and high yield potential.