The study used the DSSAT model to assess potential soybean yields in different regions of India and validated it under diverse agroecological conditions. The average simulated yield under irrigated conditions was 3794 kg ha−1 relative to the simulated average rainfed yield of 2446 kg ha−1, showing a 35.52% reduction in grain yield due to adverse moisture conditions under rainfed conditions. Relative to simulated yield, the average observed (actual) rainfed yield across 43 districts of India was 1025 kg ha−1, which was 2769 and 1421 kg ha−1 lower than irrigated and rainfed potential yield, respectively. A significant positive correlation was observed between simulated water non-limited yield and solar radiation (R2 = 0.55, p ≤ 0.05). The simulated rainfed grain yield (R2 = 0.66, p ≤ 0.05) had a significant, positive, and curvilinear relationship with growing season rainfall. On the other hand, the actual yield (R2 = 0.008) showed a non-significant relationship with mean crop seasonal rainfall across locations. The gap between simulated yield under irrigated and rainfed conditions is huge at locations with low seasonal rainfall and narrows with increasing rainfall. In addition, the gap between actual yield and simulated yield under rainfed conditions was larger, even in high seasonal rainfall areas. The yield gap under rainfed conditions is due to the non-adoption of improved crop management practices and could be reduced with proper interventions. This includes adapting drought-resistant varieties, conserving rainwater, changing land configuration, and adopting waterlogging-tolerant varieties using improved technology to reduce the soybean yield gap.