Water deficit stress negatively affects wheat growth, physiology, and yield. In lab and hydroponic experiments, osmotic stress levels (control, −2, −4, −6 and −8 Bars) created by PEG-6000, caused a significant decline in germination, mean germination time, root, shoot, and coleoptile length in both wheat genotypes examined. Germination was inhibited more in Wafaq-2001 than in Chakwal-50. Wafaq-2001 showed a higher susceptibility index based on root and shoot dry weight than did Chakwal-50. Wheat plants exhibited osmotic adjustment through the accumulation of proline, soluble sugars, soluble proteins, and free amino acids, and increased antioxidation activities of superoxide dismutase, peroxidase, catalase, and malondialdehyde. Increasing water deficit stress caused a linear decline in chlorophyll contents, leaf membrane stability, and relative water content in all wheat plants, with Wafaq-2001 showing a more severe negative impact on these parameters with increasing stress levels. The results suggest the possibility of utilizing some of these parameters as quantitative indicators of water stress tolerance in plants. Gas exchange measurements (photosynthesis, transpiration, stomatal conductance), leaf osmotic potential, water potential, and yield attributes decreased more abruptly with increasing water deficit, whereas leaf cuticular wax content increased in both genotypes, with more severe impacts on Wagaq-2001. More reduction in biochemical, physiological, and yield attributes was observed in Wafaq-2001 than was observed in Chakwal-50. Based on these results, we can conclude that Chakwal-50 is a more drought-tolerant genotype, and has excellent potential for future use in breeding programs to improve wheat drought tolerance.