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Rice-wheat (RW) cropping system of the Indo-Gangetic Plains has played a significant role in the food security of India. However, sustainability of this important cropping system is at risk due to the deterioration of soil health, mounting pressure on natural resources and emerging challenges of climate change. Conservation agriculture involving zero-or minimum-tillage and innovations in crop residue management (CRM) to avoid straw burning should assist in achieving sustainable productivity and allow farmers to reduce nutrient and water inputs, and reduce risk due to climate change. High yields of the irrigated RW system have resulted in production of huge quantities of crop residues (CRs). Burning of rice straw is common in north-western parts of India causing nutrient losses, and serious air quality problems affecting human health and safety. Mulch is a good option for rice residue management during the wheat crop, especially with no tillage. Mulch can increase yield, water use efficiency, and profitability, while decreasing weed pressure. Surplus residue from the previous wheat crop can be incorporated into the paddy fields with no adverse effect on rice yield. Residue decomposition in anaerobic flooded soil substantially increases methane emission relative to residue removal. Long-term studies of the residue recycling have indicated improvements in physical, chemical and biological health of soil. Since CRs contain significant quantities of plant nutrients; their continuous application will have positive effect on fertilizer management in RW system. Other plausible option of CRM lies in utilizing a potion of surplus residue for producing biochar (and co-production of bioenegy) for using as soil amendment to improve soil health, increase nutrient use efficiency and minimize air pollution. In this review authors have discussed current concerns and possible options for with efficient management of CRs in the RW cropping system.