Drought has a significant impact on plants, affecting their growth, development and survival. This study focuses on evaluating the impact of drought stress, a significant abiotic factor, on the agronomic and fiber parameters of potential cotton (Gossypium hirsutum L.) lines with the aim of developing drought-tolerant varieties. The experiment involved two irrigation regimes—well-watered (100% field capacity) and deficit irrigation (50% field capacity)—conducted on F9–F10 generations. Key fiber parameters, including fiber length, boll weight, fiber strength, and lint percentage, were identified as crucial selection criteria under both well-watered and deficit irrigation conditions. Notably, boll number emerged as the decisive parameter in both F9 and F10 generations. The study employed univariate and multivariate analyses, such as PCA, heat map cluster, correlation analysis, and decision tree, which consistently highlighted fiber length, boll weight, fiber strength and lint (ginning) percentage the key factor. In the F10 generation, the integration of decision tree and heat map cluster results led to the identification of 8 promising lines. These selected genotypes have potential for inclusion in future cotton breeding programmes, offering the opportunity to increase drought tolerance and improve cotton yield and productivity. Their resilience to environmental stresses makes them promising candidates for improving overall cotton performance under challenging conditions.