Water limitation is a major production constraint for sugarcane worldwide. However to date there has been little investigation of patterns of genetic variation for response to water stress in sugarcane. Field experiments were conducted over three years under fully irrigated and managed water stress conditions at three locations in Northern Queensland in Australia. One hundred and thirty one clones representing commercial and introgression lines (genetically diverse) were evaluated for their yield and physiological performance. Water stress treatments reduced cane yield (tonnes cane hectare-1-TCH) and total dry matter (TDM) by 17 to 52% and 20 to 56%, respectively, compared with irrigated treatments in the same experiments. Cane yield, CCS and most of the morphological and physiological parameters studied showed substantial variation within the test population under moderate to severe water stress condition. There was little G×E for cane and sugar yield under mild and moderate water stress conditions. The ranking of clones based on these parameters did not change under well-watered and moderately stressed conditions. However, there was significant G×E effect of cane and sugar yield under severe water stress condition. This situation however was rare under commercial production where nearly 50% yield reduction in cane yield was recorded. Commercial cultivars out-perform unselected clones (introgression lines) under both stressed and non-stressed conditions. Though sugar content in few clones crashed to very low levels under severe stress conditions, in general, it was less affected than cane yield in stressed plants. Leaf and stalk elongation and leaf senescence were the most affected morphological characteristics in stressed plants. This was true even under moderate stress condition. Notably stalk thickness did not change significantly across variable moisture environments. Stomatal conductance (gs) was affected by moderate to severe water stress. The GE variation was smaller than the clone (G) variation in many occasions. High genetic correlations (g =-0. 29 to 0.94) for gs were observed across test environments in all 3 different production regions. Canopy conductance (gc) based on gs and leaf area index (LAI) showed a stronger genetic correlation than the gs with cane yield at 12 months (mature crop). The regression analysis of input weather data for the duration of measurements showed the predicted values of g mostly correlated with the maximum temperature (r = 0.47) during the measurements than the other environmental variables. Stress index (crop water supply-demand ratio) and vapour pressure had significant effects but were lower than maximum temperature. These results confirmed that the canopy conductance would have immense potential as a selection criterion for early-stage selection of clones for efficient water use and biomass production in sugarcane.