Drip irrigation studies were conducted in aerobic rice during the dry season (July–October) of 2011 in Coimbatore, Tamil Nadu, India with three levels of lateral distances (0.6, 0.8 or 1.0 m) and two discharge rates, viz., 0.6 and 1.0 litre per hour (LPH) emitters. Among the lateral distances, 0.8 m lateral distance adjudged as optimum spacing for better performance in terms of physiological responses as well as yield. Between two-discharge rates, 1.0 LPH drippers out performed 0.6 LPH drippers. Interactively, laterals spaced at 0.8 m with 1.0 LPH drippers exhibited best performance by way of physiological attributes [such as relative water content, chlorophyll stability index, soluble protein, photosynthesis (PN), stomatal resistance (gs), internal CO2 concentration (Ci), nitrate reductase activity and proline content], yield and its components along with water productivity. Therefore, it is suggested that the lateral spacing of 0.8 m with 1.0 LPH drippers with the plants spaced at 20 × 10 cm is the best treatment for aerobic rice cultivation in enhancing the grain yield and water productivity in the areas of limited water availability. © 2015, Indian Society for Plant Physiology.