The genomic basis underlying the selection for environmental adaptation and yield-related traits in maize remains poorly understood. Here we carried out genome-wide profiling of the small RNA (sRNA) transcriptome (sRNAome) and transcriptome landscapes of a global maize diversity panel under dry and wet conditions and uncover dozens of environment-specific regulatory hotspots. Transgenic and molecular studies of Drought-Related Environment-specific Super eQTL Hotspot on chromosome 8 (DRESH8) and ZmMYBR38, a target of DRESH8-derived small interfering RNAs, revealed a transposable element-mediated inverted repeats (TE-IR)-derived sRNA- and gene-regulatory network that balances plant drought tolerance with yield-related traits. A genome-wide scan revealed that TE-IRs associate with drought response and yield-related traits that were positively selected and expanded during maize domestication. These results indicate that TE-IR-mediated posttranscriptional regulation is a key molecular mechanism underlying the tradeoff between crop environmental adaptation and yield-related traits, providing potential genomic targets for the breeding of crops with greater stress tolerance but uncompromised yield.