The present investigation was carried out with a view to study the heterosis, combining ability and gene action for seed cotton yield, yield attributing traits, ginning outturn and important fibre quality parameters in tetraploid cotton (G. hirsutum L. and G.barbadense L.). A set of 38 genotypes, including six parents of which three each belonged to G .hirsutum and G. barbadense, 30 crosses and two check hybrids were grown at three Cotton Research Stations viz., Surat, Hansot and Achhalia during kharif 2011-12. The hybrids were developed adopting complete diallel mating design. Analysis of variance showed significant differences amongst parents and hybrids for all the characters indicating presence of genetic variability. The cross G.Cot.20 x G.Cot.16 recorded the highest heterobeltiosis and standard heterosis for seed cotton yield. Combining ability analysis indicated that both additive and non additive gene effects were important in the inheritance of all the traits. The ratio of variance due to GCA to that of SCA was greater than one for plant height, boll weight, seed cotton yield per plant and fibre strength indicating preponderance of additive effects in the inheritance of these characters. On the other hand, σ2GCA:σ2SCA was less than unity for number of sympodia per plant, number of bolls per plant, ginning outturn and 2.5% span length indicating importance of dominance gene effects in the inheritance of these characters. Mean squares due to reciprocal effects were significant for number of sympodia per plant, plant height, bolls per plant, boll weight, seed cotton yield per plant, ginning outturn and 2.5% span length. In general, parents belonging to G.hirsutum species showed good general combining ability for yield and yield components while G.barbadense parents found to be good general combiners for fibre quality traits. Two crosses BC-68-2 x G.Cot.20 and G.Cot.20 x GSB-39 registered significant and positive SCA effects along with significant and positive standard heterosis for seed cotton yield and majority of yield components and fibre quality traits.