Breeding crops for disease resistance is a sustainable approach to reduce yield losses. While significant research on the adoption and impacts of improved crop varieties exists, most studies have analyzed yield effects in general, without distinguishing between different varietal traits and characteristics. Here, panel data from wheat farmers in Ethiopia are used to compare improved varieties that are resistant to stripe rust (caused by Puccinia striiformis f. sp. tritici) with improved susceptible and traditional susceptible varieties. Production function estimates suggest that improved resistant varieties raise effective yields by 8% in comparison to local susceptible varieties. The yield difference between improved resistant and improved susceptible varieties is positive but small, because rust levels were not very high in the years under study. However, under drought and other abiotic stresses, improved varieties – with and without resistance to stripe rust – perform notably worse than local varieties. The worse performance under abiotic stress may also explain why many farmers recently switched back to growing traditional varieties. Sustainable adoption needs a combination of various traits in the same varieties, including high yield potential, grain quality, disease resistance, and tolerance to drought and other production stresses.