Adjusted milk yield for 305 days and two milking times along with actual first lactation records of 187138 Holstein cows were used to find out the effect of record adjustment on variance components estimation and on genetic evaluation. Records had been gathered by the Animal Breeding Center of Iran during years 1991 to 2006. The pedigree file included 288032 animals. A single animal model with Average Information Restricted Maximum Likelihood (AIREML) was employed for data analysis. Milk yield heritability was estimated as 0.24 and 0.23 for adjusted and actual records, respectively. The rank correlations of 0.977, 0.975, and 0.987 were estimated for all, female, and male animals respectively based on the estimated breeding values of adjusted and non-adjusted records. The rank correlations among the 100, 200, 1000, and 2000 top animals were 0.500, 0.377, 0.491, and 0.529 respectively. In general, it could be concluded that adjustment of records tends to incline the breeding value of animals toward the population mean, leading to selection of animals of average breeding value.