A seismic zone in southwestern India extending 30 km south from Koyna Dam has witnessed more than 150 earthquakes of M ≧ 4 and 10 of M ≧ 5 during the last 34 years. During August 1993 to December 1994, a spurt of earthquakes occurred in the vicinity of the newly impounded Warna reservoir, 25 km south of Koyna Dam. The epicenters are located between the two reservoirs but more near the new reservoir. During 1994, digital data acquisition systems were deployed by the National Geophysical Research Institute in the vicinity of the Koyna-Warna reservoirs to help in understanding the physical processes responsible for generating earthquakes in the area. Source parameters were estimated at three stations using S-wave spectrum for 193 selected earthquakes of M = 1.5 to 4.7 that were recorded during October 1994 to June 1995. Seismic moments of 1011 to 1016 N-m, source radii from 94 to 538 m, and stress drops of 0.03 to 19 MPa for earthquakes of magnitude 1.5 to 4.7 were obtained from this analysis. It is observed that earthquakes of M ≧ 3 are associated with larger stress drops of more than 2 MPa. The larger energy release (through more numbers of M ≧ 3 earthquakes) and higher stress-drop values are found in 0 to 1 km and 5 to 13 km depth ranges. Depth range of 1 to 4 km has low seismicity and low stress-drop earthquakes. Higher energy release and stress drops are possibly caused by higher stress concentration and incremental stress on rocks with fluids in subhydrostatic conditions in 0 to 1 km depth range and suprahydrostatic conditions in 5 to 13 km depth range. Spatially, the earthquakes of M ≧ 3 and high stress drop are now less near Koyna reservoir but frequent near the new reservoir.