Water and nitrogen are two important environmental factors controlling rice growth. Increasing the amount of dissolved oxygen in rhizosphere via the regulation of soil water content, such as the dry-wet alternate irrigation and aerobic cultivation, can promote soil nitrification potential and oxidation-reduction potential, stimulate soil nitrogen mineralization, and provide a mixed nutrition of NH₄⁺ and NO₃^- for rice. It can also increase the rice resistance to drought, rice biomass, and efficiency of nitrogen use through induction of rice physiological property and improvement of root absorption ability. Plant photosynthetic rate is the main way to increase crop yield. Nitrogen concentration and nitrogen type are closely related to the photosynthetic rate in rice, and the increase of photosynthetic rate enhances nitrogen-use efficiency and plant biomass in rice. This paper reviewed recent progress in the studies on the effects of water management on soil nitrogen morphological characteristics, rice nitrogen absorption and utilization, photosynthetic rate, and environmental effects of nitrogen, thus pointing out the problems and emphasizing the direction of further research.