Plants retain the preceding abiotic stress memory that may aid in attainment of tolerance to subsequent stresses. This study was conducted to evaluate the influence of terminal drought memory (drought priming) and seed priming in improving drought tolerance in wheat (Triticum aestivum L.). During first growing season, wheat was planted in field under optimal (well-watered) and drought stress imposed at reproductive stage (BBCH growth stage 49) until maturity (BBCH growth stage 83). Seeds collected from both sources were subjected to hydropriming or osmopriming (with 1.5% CaCl2 solution); while, dry seed was taken as control. Treated and control seeds, from both sources, were sown in soil filled pots. After the completion of seedling emergence, pots were maintained at 50% water holding capacity (drought) or 100% water holding capacity (well-watered). Drought stress suppressed the plant growth (2–44%), perturbed water relations (1–18%) and reduced yield (192%); however, osmolytes accumulation (3–14%) and malondialdehyde contents (26–29%) were increased under drought. The crop raised from the seeds collected from terminal drought stressed plants had better growth (5–63%), improved osmolyte accumulation (13–45%), and lower lipid peroxidation (3%) than the progeny of well-watered crop. Seed priming significantly improved the crop performance under drought stress as compared to control. However, osmopriming was more effective than hydropriming in this regard as it improved leaf area (9–43%), tissue water status (2–47%), osmolytes accumulation (6–48%) and grain yield (14–79%). In conclusion, terminal drought induced modifications in seed composition and seed priming improved transgenerational drought tolerance through improvement in tissue water status and osmolytes accumulation, and decrease in lipid peroxidation.