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Dissimilatory nitrate reduction to ammonium (DNRA), denitrification, anaerobic ammonium oxidation (anammox), and biological N fixation (BNF) can influence the nitrogen (N) use efficiency of rice production. While the effect of N application on BNF is known, little is known about its effect on NO partitioning between DNRA, denitrification, and anammox. Here, we investigated the effect of N application on DNRA, denitrification, anammox, and BNF and on the abundance of relevant genes in three paddy soils in Australia. Rice was grown in a glasshouse with N fertilizer (150 kg N ha) and without N fertilizer for 75 days, and the rhizosphere and bulk soils were collected separately for laboratory incubation and quantitative PCR analysis. Nitrogen application reduced DNRA rates by >16% in all the soils regardless of the rhizospheric zone, but it did not affect the gene abundance. Without N, the amount and proportion of NO reduced by DNRA (0.42 to 0.52 μg g soil day and 45 to 55%, respectively) were similar to or higher than the amount and proportion reduced by denitrification. However, with N the amount of NO reduced by DNRA (0.32 to 0.40 μg g soil day) was 40 to 50% lower than the amount of NO reduced by denitrification. Denitrification loss increased by >20% with N addition and was affected by the rhizospheric zones. Nitrogen loss was minimal through anammox, while BNF added 0.02 to 0.25 μg N g soil day We found that DNRA plays a significant positive role in paddy soil N retention, as it accounts for up to 55% of the total NO reduction, but this is reduced by N application. This study provides evidence that nitrogen addition reduces nitrogen retention through DNRA and increases nitrogen loss via denitrification in a paddy soil ecosystem. DNRA is one of the major NO reduction processes, and it can outcompete denitrification in NO consumption when rice paddies are low in nitrogen. A significant level of DNRA activity in paddy soils indicates that DNRA plays an important role in retaining nitrogen by reducing NO availability for denitrification and leaching. Our study shows that by reducing N addition to rice paddies, there is a positive effect from reduced nitrogen loss but, more importantly, from the conversion of NO to NH, which is the favored form of mineral nitrogen for plant uptake.