A field experiment was conducted to assess the effects of combined application of farm yard manure (FYM) and inorganic NP fertilizers on soil physico-chemical properties and nutrient balance in a rain-fed lowland rice production system in Fogera plain, northwestern Ethiopia. The study was carried out during the main cropping seasons of 2010 and 2011. Twenty-seven treatments comprising a factorial combination of three rates of FYM (0, 7.5, and 15 t·ha ) were tested. The experiments were laid out as a randomized complete block design with three replications. Bulk density, organic matter content, and available water holding capacity, total N, and available P of the soil were measured just after harvesting the rice crop. Results showed that application of 15 t·FYM·ha −1 significantly increased soil organic matter and available water holding capacity but decreased the soil bulk density, creating a good soil condition for enhanced growth of the rice crop. Application of 15 tFYM·ha −1 increased the level of soil total nitrogen from 0.203% to 0.349%. Combined application of 15 t·ha −1 ·FYM and 100 kg·P 2 O 5 ·ha −1 increased the available phosphorous from 11.9 ppm to 38.1 ppm. Positive balances of soil N and P resulted from combined application of FYM and inorganic N and P sources. Application of 15·t ha From the results of this experiment, it could be concluded that combined application of FYM and inorganic N and P fertilizers improved the chemical and physical properties, which may lead to enhanced and sustainable production of rice in the study area.