Background and Objective: Complete knowledge on the extent of genetic variability and interrelationships of yield and components traits is pre-request for designing an effective and efficient selection based rice improvement programs for generating high yielding rainfed lowland rice genotypes. The objective of this study was in order to determine the extent of genetic variability and association of characters with grain yield and among themselves. Materials and Methods: Twenty-five rainfed lowland rice genotypes were evaluated during the 2016 main cropping season at two rainfed lowland agro-ecologies of Southwestern Ethiopia. The experiment was laid out in a simple lattice design and data on 14 yield and yield component traits were collected and subjected to various statistical analyses. Results: Combined analysis of variance across locations revealed significant location, genotype and genotype x location interaction effects for several traits evaluated at p ≤ 0.01. The phenotypic coefficient of variation (PCV) ranged from 2.14% for days to 85% maturity to 18.09% for grain yield, while the genotypic coefficient of variation (GCV) ranged from 0.71% for days 85% to maturity to 10.48% for grain yield. Heritability estimate in broad sense was high for plant height (74.15) and low for days to 85% maturity (11.06) and harvest index (23.47). Plant height displayed high heritability along with moderate genetic advance as percent of mean value and days to 85% maturity and harvest index exhibited low GCV, heritability and genetic advance as percentage of mean estimates. Correlation coefficient analysis of grain yield showed positive and significant association with number of primary branches per panicle at both phenotypic and genotypic levels. Separation of correlation coefficients into direct and indirect effects of component traits on grain yield revealed that number of primary branches per panicle exerted the maximum positive direct effect on grain yield at both genotypic and phenotypic levels. Conclusion: The present study indicated sufficient amount of genetic variability for the majority of the characters studied in rainfed lowland rice genotype for future exploitation in selection based improvement programs.