Successful hybrid development work in cotton involves unearthing information of combining ability, heterosis and per se performance of the genetic material. This study involved multi‐environment estimation of combining ability and heterosis along with the stability of per se performance using Bt cotton genetic materials for seed cotton (Gossypium hirsutum L.) yield. Combining ability analysis across environments showed significant effects on the performance of genotypes, general combining ability (gca), specific combining ability (sca), genotype × environment, GCA × environment, and SCA × environment interactions. Combining ability variance revealed the predominance of nonadditive gene actions for seed cotton yield. The mean performance combining ability estimates were varied with the locations for parents as well as for hybrids. In a low yielding environment, the transgenic BGI parents, as well as hybrids, showed superior seed cotton yield levels compared with BGII or non‐Bt versions. There was a significant increase in heterosis noticed in BGII hybrids compared with BGI hybrids in a low yielding environment. The stability parameters showed significant genotype × environment variation and indicated that the stability of the genotype was mainly affected by the genetic background of the material. A positive association was noticed between per se performance and gca effects, heterobeltiosis and sca, and heterobeltiosis and mean of hybrids as the environment`s yield potential increased. The majority of the Bt hybrids showed positive heterosis over a better parent. Among the two versions of Bt transgenic cotton, BGI excelled in per se performance and gca and sca effects for seed cotton yield either in the homozygous form or hemizygous hybrids.