Introduction: Information on nature and magnitude of present variability in a population is an important pre-requisite for starting any breeding program. Moreover, the knowledge about correlations among various characters and further partitioning them into direct and indirect effects is a rational approach to understanding such a relationship which is helpful for multiple trait selections. The present study was undertaken to determine the Genetic variability and heritability of important economic characters, interrelationships among them and their direct and indirect effect on yield in Iranian onion landraces. Materials and Methods: Seeds of twenty landraces were planted using a randomized complete block design with three replications in East Azarbayjan Agricultural and Natural Resources Research and Education Center for two years. Thirty plants were selected at random in each plot to record the observations on yield/plant, leaf length, number of leaves/plant, bulb length, bulb diameter, number of centers, number of edible layers, bulb dry matter and shape index. Broad-sense heritability, expected Genetic advance, Genetic variability, correlation coefficient, and path coefficient analysis calculated. Results and Discussion: Analysis of variance showed significant effects for all studied traits. Therefore, sufficient Genetic variability exists among the onion landraces. The bulb yield per plant had the utmost phenotypic and genotypic coefficients of variation (PCV and GCV) (27. 81% and 24. 27%, respectively). This shows the prevalence of greater Genetic variability among the genotypes which offers good opportunities for crop improvement through selection. Medium PCV and GCV were displayed in bulb diameter, number of leaves/plant, leaf length, number of center and shape index. But number of edible layers and bulb dry matter showed low GCV and PCV indicating less scope of selection as they are under the influence of environment. The estimates of phenotypic coefficients of variation were higher than their corresponding genotypic coefficients of variation for all the traits. That might be due to interaction of genotype with environment to the same degree or other denoting environmental factors influencing the expression of these traits. A high degree of disparity between PCV and GCV for most of the traits showed their susceptibility to environmental fluctuations. In present study, the estimates of broad-sense heritability ranged from 16% for number of edible layers to 88% for shape index. Heritability estimates were very high for bulb diameter, leaf length, and number of centers and shape index, indicating the possibility of success in selection. Heritability estimates were relatively high for yield/plant, bulb length and number of leaves/plant. In addition, moderate heritability estimate was observed for bulb dry matter. On the other hand, low heritability estimates was also observed for number of edible layers indicating the limited scope for improvement of this trait through selection. The expected Genetic advance expressed as a percentage of the mean by selecting the top 5% of the accessions, varied between 1. 6% for number of edible layers to 43. 55% for yield/plant. Genetic advance as percentage of mean was maximum for yield/plant followed by number of centers, shape index, leaf length, bulb diameter, number of leaves/plant and bulb length. Genetic coefficient of variation, heritability, and Genetic advance were high in yield/plant. Therefore, yield/plant could be useful basis for selection. In most traits, the genotypic correlation coefficients were higher than the phenotypic correlation coefficients which indicated the inherent association among various characters independent of environmental influence. Bulb-yield/plant showed significant positive correlation with leaf length, leaf number, bulb diameter and bulb length at phenotypic and genotypic levels. So, improvement of leaf length, leaf number, and bulb diameter and bulb length traits could improve the capacity of the plants to synthesize and translocate photosynthates to the bulb. The path analysis showed that bulb diameter has the largest positive direct effect on bulb-yield/plant. The indirect effect of length of leaves on onion yield through bulb diameter was considerable. Accordingly, selection of plants with larger leaf length and bulb diameter could be suitable for breeding onion for higher yield. The presence of negligible residual effect (0. 06) indicated that most of the important traits contributing to yield were included in the path analysis. Conclusions: Results showed that potential of onion landraces with high Genetic diversity in selection for development of cultivars with favorable agronomic and market traits is high. The high Genetic coefficient of variation, heritability, and Genetic advance were found in yield/plant. Therefore, yield/plant could be useful basis of selection. In addition, the path analysis showed that selection of plants with larger leaf length and bulb diameter could be suitable for breeding onion for higher yield.