In order to study the genetic and environmental variability of morphological and phenological characteristics and also to gain a better understanding of the morphological basis of yield variation in soybean, an experiment was conducted at Research Farm, College of Agric., Isfahan University of Technology, in 1996. The experiment was arranged in three augmented designs with 285 lines and 5 control varieties. There were highly significant differences among genotypes for all the characteristics studied. The phenotypic coefficients of variability were greater than the genotypic ones for all the traits although the differences for most of them were small. The highest phenotypic and genotypic coefficients of variation, in order of magnitude, were obtained for number of pods per plant, days to flowering, plant height, height of the lowest pod, and number of lateral branches. Heritability estimates and the percent of genetic improvement for these traits and seed weight were high but for seed yield per plant were low. The lowest coefficients of variability were related to number of seeds per pod and days to germination. The results of stepwise regression analysis indicated that the maximum variation in seed yield could be attributed to the number of pods per plant, number of seeds per pod, and 100-seed weight. Factor analysis in addition to emphasizing the importance of yield components, resulted in four factors which determined 97.34% of yield variation. These factors which were indicators of physiological sink and source, with respect to the traits contained, were named as photosynthetic sink, plant architecture, fixed capital, and weight, respectively. In general, it was concluded that in order to improve soybean cultivars, selection should be in favor of plants with stronger structure, higher number of leaves, nods and pods per plant, and higher seed weights.