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Background: For manipulating N 2 fixation and improve the N benefits to agricultural legumes, there is a need to reduce the inhibitory effect of applied N on Rhizobia inoculant. The optimum level of inorganic N as starter fertilizer with inoculation of Rhizobia is essential to increase the production of legumes in smallholder farmers. However, the effect of inorganic N level which should be used by farmers with an inoculation to increase the production of soybean is not yet well known in soils of western Ethiopia. Therefore, the study conducted to determine the amount of starter N application which could enhance N 2 fixation and soybean seed yield using Rhizobial inoculation and different nitrogen doses. Methods: Six levels of nitrogen fertilizer (0, 9, 18, 27, 36, and 54 kg N ha −1) and two levels of inoculation (inoculated (1) and un-inoculated (0)) were arranged using split-plot RCBD with three replications. Result: Seed inoculation with Rhizobia was significantly superior over un-inoculated treatments. Both rhizobia inoculation and N rates applied alone increased nodulation and yield of soybean, however, their combination further increased nodulation, growth performance, and seed yield and yield traits of soybean. Although nodulation parameters showed inconsistent results across cropping seasons, N application improved nodulation and shoot dry weight and interacted positively with inoculation across locations. Increasing rates of N from zero up to 18 kg ha −1 increased nodule number and dry weight but further increase of N reduced nodulation. Application of N at 18 kg ha −1 increased nodule number and dry weight by 98.3 and 115.0%, respectively over un-fertilized control as well as by 61.0 and 58.0%, respectively over the greatest N rate (54 kg N ha −1). The highest seed yield of soybean was obtained when inoculation applied with N at 18 and 27 kg ha −1 in 2016/17 and 2017/18, respectively across locations. However, seed yield in the 2016/17 cropping season was much higher than 2017/18. In 2016/17 and 2017/18, inoculation together with N at 18 kg ha −1 increased grain yield by 75.0 and 76.8% compared with for the control plants, 50.7 and 31.6% compared with inoculation alone, respectively. In both cropping seasons, the un-inoculated plants had shown a trend that an increase in seed yield with increased N rate. Conclusion: Application of fertilizer N up to 18 kg ha −1 may be an optimum rate for effective nodulation and enhanced N 2 fixation and thereby improved soybean yield. The present results demonstrate the potential of improving soybean nodulation, growth, and seed yield profitability using Rhizobia inoculant together with starter N at low N Nitisols soils of Western Ethiopia.