Genetic analysis of seed production and the effect of water stress on seed and forage production have not been addressed simultaneously in orchardgrass (Dactylis glomerata L.). Thirty-six genotypes of orchardgrass were clonally propagated and evaluated in the field under two moisture environments (normal and water stress) during 3 years (2013–15). A high degree of variation was observed among genotypes for all of the measured traits. Water stress had a negative effect on seed weight per plant and dry matter biomass per plant, and it reduced genotypic variation for most of the traits. A significant and positive correlation was found between seed weight per plant and dry matter biomass per plant, which suggested that simultaneous selection for both traits is possible in normal as well as water-stress environments. The results also indicated that traits explaining seed and forage production variability were not exactly the same in water-stress and non-stress environments. Therefore, indirect selection based on seed weight and dry matter biomass components under normal and water-stress conditions may result in genotypes with different performances. In both normal and water-stress environments, some genotypes were identified as superior with respect to high seed weight and dry matter biomass per plant. These genotypes can be used for further studies to improve seed weight and dry matter biomass per plant, simultaneously.