Intronic regions of eukaryotic genomes accumulate many Transposable Elements (TEs). Intronic TEs often trigger the formation of transcriptionally repressive heterochromatin, even within transcription-permissive chromatin environments. Although TE-bearing introns are widely observed in eukaryotic genomes, their epigenetic states, impacts on gene regulation and function, and their contributions to genetic diversity and evolution, remain poorly understood. In this study, we investigated the genome-wide distribution of intronic TEs and their epigenetic states in the Oryza sativa genome, where TEs comprise 35% of the genome. We found that over 10% of rice genes contain intronic heterochromatin, most of which are associated with TEs and repetitive sequences. These heterochromatic introns are longer and highly enriched in promoter-proximal positions. On the other hand, introns also accumulate hypomethylated short TEs. Genes with heterochromatic introns are implicated in various biological functions. Transcription of genes bearing intronic heterochromatin is regulated by an epigenetic mechanism involving the conserved factor OsIBM2, mutation of which results in severe developmental and reproductive defects. Furthermore, we found that heterochromatic introns evolve rapidly compared to non-heterochromatic introns. Our study demonstrates that heterochromatin is a common epigenetic feature associated with actively transcribed genes in the rice genome.