ABSTRACT Water deficit significantly reduces yield potential of peanut (Arachis hypogaea L.) worldwide. Availability of drought tolerant cultivars is essential, but their selection is difficult, in particular in environments where rainfall is unpredictable. This study investigated the response of eleven peanut genotypes to three water regimes and was aimed to determine if use of rainout shelters is a reliable selection method for drought tolerance in a sub-humid environment with unpredictable rainfall pattern. Water regimes were achieved by covering the plots from mid-July to early Sep with the rainout shelters and irrigating the plots to pre-determined levels: well-watered (WW) regime received full irrigation of 40 mm weekly, moderate deficit (MD) 17 mm weekly, and severe deficit (SD) only 40 mm in one “survival” irrigation in late Aug. Results showed that MD and SD reduced yield and grade for all genotypes. Compared with WW, economic value of all genotypes was 24% less under MD and 68% less under SD. Small seeded runner cultivars, ‘Florida 07′ and ‘Georgia 06G', had higher yield and grade than Virginia-type cultivars under deficit irrigation, in particular under SD. Among the Virginia-type, ‘Sugg' had highest yields under SD but was out yielded by ‘Bailey' and ‘Phillips' under MD. ‘Wynne' and ‘Spain' are the largest seeded Virginia-type cultivars; they performed poorest for yield and grade. The relative proportion of oleic fatty acid (C18:1) was less under SD compared to WW; and linoleic fatty acid (C18:2) and total saturated oils were more, but intensities depended on the genotype. Finally, the rainout setting provided comparative results with real farm peanut production in the region; this is important for breeding programs in Virginia and Carolinas, where rainfall unpredictability does not allow for drought screening in an open field setting.