Background and Objective: The main factor for successful hybrid rice technology is to identify superior parental lines for producing new hybrids. So, the selection for developing parental lines is constantly a confront for rice breeders. The current research was conducted at an experimental farm at the Agricultural Research Station in Sakha Kafr El-Sheikh, Egypt to study combining ability and gene action for the development of grain yields and its components in the 2019 and 2020 seasons as well as some grain quality characteristics of parental lines to hybrid rice and to be utilized in hybrid rice breeding program. Materials and Methods: The experiment comprised 21 crosses derived from seven varieties/lines namely, IR69625B, BR 7414-22-1, Ghaiya, IR58025B, Sakha 101, Giza 178 R and G46B. Half of the diallel cross was made among these seven varieties of rice. Results: The results showed that the general combining ability and specific combining ability were highly significant for all the traits studied except SCA for milling percentage. This indicated the importance of both additive and non-additive genetic variances in determining the inheritance of studied traits. GCA/SCA ratio was more than unity for all studied traits, indicating the preponderance of additive gene effects in the expression of these traits except number of spikelets/panicle, grain yield/plant and milling percentage. Conclusion: It can be concluded that selection procedures based on the accumulation of additive effects will be successful in improving these traits. Moreover, Giza 178R and BR 7414-22-1 are good general combiners for grain yield/plant, while Sakha 101, Ghaiya and G46B are good general combiners for 1000-grain weight.