Sheath rot is one of the most destructive emerging diseases of rice in Asia and a significant loss (20–85%) to rice production is caused by this disease under temperate agro-climatic conditions of Kashmir. Disease is more prevalent in higher belts of valley where Japonica rice cultivation is more common. Also, late-maturing varieties are more likely to be attacked by sheath rot disease of rice. Information regarding the occurrence and distribution of any pathogen and its variability in the field is very much essential to devise a suitable disease management programme against the particular pathogen. The isolates of Sarocladium oryzae tested in the present study exhibited considerable variation in cultural characteristics, morphology and pathogenicity. The resistant sources for sheath rot disease of rice were identified among the temperate germplasm of rice under a relatively high inoculum concentration and disease pressure of all the variable isolates of S. oryzae. Among 219 rice genotypes screened for resistance against S. oryzae under field conditions, 42 genotypes were further evaluated under controlled epiphytotic conditions against all the 18 isolates of S. oryzae. Four genotypes (SKUA-354, ORN-V4, GS-183, GS357) were finally selected with high resistance against sheath rot disease of rice which can be utilized as potential donors for the development of disease-resistant varieties of rice against sheath rot.