Breeding of low-N tolerant cultivars of wheat is one approach to reduce N fertilizer input, while maintaining acceptable yields. The objective of this investigation was to develop new bread wheat genotypes (transgressive segregants) of high grain yield under low-N stress conditions. Seventy fiveF 3 families were selected for high grain yield fromF 2 populations of diallel crosses among 6 parents under low-N and high-N and evaluated for grain yield and nitrogen use efficiency (NUE) traits in their F 3 progenies compared with their parents under both high and low N conditions, using a split plot design in lattice (9 x 9) arrangement with three replications. The best F 3 families (4) that exhibited the highest grain yield and NUE under low-N as well as under high-N and exceeded significantly their better parents in the respective crosses were identified. They were all selected under low-N conditions and were significantly superior over their respective better parents. Actual significant superiority over the better parent in grain yield/plant ranged from 21.5% for SF11 to 33.7% for SF13 under low-N stress and from 14.2% for SF14 to 25.3% for SF11 under high-N conditions. Actual gain from selection for high yield in the best F 3 selected families is higher than corresponding expected genetic gains under both low-N and high-N.Superiority in grain yield over better parent were attributed to their high superiority in number of spikes/plant reaching to 80.1%, number of grains/ spike reaching to 31.2% and 100-grain weight reaching to 50.9% under low-N target environment. Selection in F 2 populations under low-N for high grain yield caused simultaneously a superiority in NUE, which reached to 30.4% under low-N and 22.7% under high-N environment. Moreover, superiority of the best selectants in grain yield and NUE traits was associated with superiority in grain protein concentration in most cases, which reached to 45.9 and 47% superiority for SF13 under low-N and high-N, respectively over the better parent.