Terminal drought stress strongly affects wheat grain yield under Mediterranean conditions. Therefore, developing early-heading bread wheat cultivars in these conditions is an important breeding strategy. In the present research, earliness was transferred from the Australian cultivar, Excalibur, to three Iranian cultivars, Roshan, Kalheydari and Mahdavi, in separate backcross (BC) breeding programs from 2012 to 2018. The earliest and latest heading genotypes of each BC 3 population, were selected as near-isogenic lines (NILs). NILs and their parents were assessed under diverse field conditions including rain-fed, moderate drought stress and well-watered conditions in three locations, Kerman, Sepidan and Semirom, during two growing seasons, 2018–2019 and 2019–2020. Breeding for early heading significantly improved earliness in all genetic backgrounds and increased grain yield by 36.4% and 9.6%, in the rain-fed and moderate drought stress conditions, respectively. Whereas, grain yield was not significantly affected by early heading under well-watered conditions. Results showed that breeding for early heading, a highly heritable trait, is an appropriate method to increase grain yield and reduce water consumption under drought stress and well-watered conditions, respectively. Based on these findings, we recommend transferring early heading to high yield late heading commercial cultivars using backcrossing. • For the first time, near isogenic lines of early heading were developed. • Breeding for early heading increased grain yield by 36.4% in rain-fed conditions. • Early heading increased grain yield by 9.6% in moderate drought stress conditions. • Early heading did not affect grain yield under well-watered conditions in Kerman.