Aerobic rice cultivation represents an innovative approach to reduce water consumption and enhance water use efficiency compared to traditional transplanting methods. Simultaneously, cultivating drought-tolerant rice genotypes becomes crucial to ensure their sustainable production under abrupt climate fluctuations. Hence, this study aimed to explore the physiological, agronomic, and grain quality responses of ten diverse rice genotypes to various irrigation levels under aerobic cultivation conditions. A field experiment was performed for two summer seasons of 2019 and 2020 in an arid Mediterranean climate. The irrigation regimes were well watered (13,998 m3/ha), mild drought (10,446 m3/ha), moderate drought (7125 m3/ha), and severe drought (5657 m3/ha). The results revealed considerable variations among rice genotypes under tested irrigation regimes in all physiological, agronomic, and quality traits. According to drought response indices, rice genotypes were classified into three groups (A–C), varying from tolerant to sensitive genotypes. The identified drought-tolerant genotypes (Giza-179, Hybrid-1, Giza-178, and Line-9399) recorded higher yields and crop water productivity with reduced water usage compared to drought-sensitive genotypes. Thus, these genotypes are highly recommended for cultivation in water-scarce environments. Furthermore, their characteristics could be valuable in breeding programs to improve drought tolerance in rice, particularly under aerobic cultivation conditions. The PCA biplot, heatmap, and hierarchical clustering highlighted specific physiological parameters such as relative water content, chlorophyll content, proline content, peroxidase content, and catalase content exhibited robust associations with yield traits under water deficit conditions. These parameters offer valuable insights and could serve as rapid indicators for assessing drought tolerance in rice breeding programs in arid environments