The production of huge amounts of biogas slurry during livestock breeding has resulted in pressing environmental issues. Although paddy fields can be potential sinks for the disposal of biogas slurry, the impacts of biogas slurry on rice production, grain quality, and relevant environmental risks in the Yangtze Delta region remain unclear. Herein, we conducted a field trial from 2021 to 2023 which involved different gradients of biogas slurry utilization, including CK (no fertilizer), CN (100% chemical nitrogen (N) of 240 kg ha−1), NBS (biogas slurry replacing 50% chemical N), BS1 (replacing 100% chemical N), BS1.5 (replacing 150% chemical N), and BS2 (replacing 200% chemical N). The results showed that there were no significant differences in average rice yields between CN, NBS, BS1.5, and BS2 over the three-year study period, with an average yield of 8283 kg ha−1, and the average yields of BS1 and CK were 7815 kg ha−1 and 6236 kg ha−1, respectively. However, heavy utilization of biogas slurry (BS1.5 and BS2) not only significantly reduced the rice seed-setting rate, the 1000-grain weight, and the processing quality, but also significantly increased the protein, amylose, Cu, and Zn content in rice grains; additionally, higher N losses occurred via surface water and increased NH3 volatilization was observed, finally resulting in lower nitrogen-use efficiency. Meanwhile, moderate utilization of biogas slurry (NBS and BS1) led to better rice quality and nitrogen-use efficiency, lower potential food safety risk, and N loss. Further, compared to BS1, NBS showed higher yield, harvest index, processing quality, gel consistency, palatability scores, and nitrogen-use efficiency, but lower N losses were present. Overall, the NBS treatment balanced the agronomic benefits and environmental risks in the Yangtze River Delta region. In the future, more attention should be paid to food safety and environmental risks when using biogas slurry.