Gene action and heritability of seed yield as well as drought stress tolerance indices were studied in rapeseed, using diallele crosses. The 28 genotypes including 21 F2 progenies and 7 parents were studied under two irrigation regimes (drought stress and normal). Genotypic variances were significant for all traits, indicating high genetic diversity among genotypes. Diallele analysis showed additive and non-additive gene action for genetic control of seed yield in both growing conditions as well as in all indices except drought response index (DRI). The results showed heterosis for seed yield and for all indices except tolerance index (TOL). Broad sense heritability was high for all traits, whereas narrow sense heritability for traits varied from low to high. Among indices, DRI and mean productivity (MP) were of high narrow sense heritability (96.58 and 68.01 respectively). The degree of dominace and variance component analysis indicated over-dominance gene action for seed yield as well as for most indices. However this over-dominance might be resulted from deviation from model assumptions, therefore it is classified as pseudo over-dominance. Also in parental lines, the frequency of dominant alleles are more than recessive ones for seed yield and for most indices. All indices except DRI show significant positive correlation with seed yield under normal growing conditions, whereas, seed yield shows a significant positive correlation only with stress tolerance index (STI) and MP under stress condition. It is concluded from this study that MP can be utilized to select drought tolerance genotypes. This index shows high genetic diversity and heritability as well as significant positive correlation with high seed yield.