Change of plant type in rice resulting in increased compactness of the panicle, allows space for accommodation of a larger number of spikelets, but grain yield does not increase proportionately because of limitations in grain filling. The objective of this study was to evaluate potential causes of poor filling of spikelets by comparing the physiological processes that influence source and sink activities between a compact- (OR-1920-7) and a loose-panicled (Lalat) rice cultivars growing in the open field conditions in the farm of Regional Research and Technology Transfer Station, Orissa University of Agriculture and Technology, Chiplima, India during dry season of 2007. Although grain number per unit length of the branches was higher in the compact-panicled cultivar than the loose-panicled cultivar, average grain weight was lower on the primary and secondary branches at top, middle and basal positions of the panicle in the former compared to the corresponding positions of the panicle in the latter. Compared to Lalat, ethylene production rate was considerably higher in the boot of the flag leaf sheath of OR-1920-7 during the pre-anthesis period. Ethylene evolution rate correlated negatively with growth and cell division rates and starch concentration of the juvenile endosperm. Because spikelet growth was slower in OR-1920-7 than in Lalat, unused carbohydrates accumulated in the endosperm. The stomatal conductance of the flag leaf during this period was also lower in the former than that of the latter and it correlated negatively with ethylene evolution rate of the boot. It is concluded that high ethylene production slackened grain filling of compact-panicled rice cultivar OR-1920-7 because of its adverse influence on both source and sink activities.