Rice–wheat rotation is a widely adopted multiple-cropping system in the Yangtze River Basin, China. Nitrogen (N) fertilizer is a key factor in regulating crop yield; however, only a few studies have considered the impact of annual N application on the yield, environmental impacts, and economic profits of rice–wheat rotation systems. In this study, a field experiment was conducted in the Jiangsu Province from 2020 to 2022. The rice and wheat seasons included six and five N fertilizer application rates, respectively (Rice: 0, 180, 240, 300, 360, and 420 kg N ha−1; Wheat: 0, 180, 240, 300, and 360 kg N ha−1), combined to form a total of 30 treatments. Life-cycle assessment was used to evaluate the environmental impacts of rice–wheat rotation under different N application treatments, using area, yield, and economic profit as functional units. Ten environmental impact categories were selected, including global warming. The results showed that grain yield did not consistently increase with an increase in N application, and the annual yield was the highest when 300 and 240 kg N ha−1 (R300W240 treatment) was applied in the rice and wheat seasons, respectively. The area-based weighting index of the R300W240 treatment ranked 20th among the 30 treatments, while the yield- and profit-based weighting indices were the lowest among the 30 treatments, decreasing by 14.9% and 28.7%, respectively, compared to the other treatments. The R300W240 treatment was the optimal annual N application strategy for rice–wheat rotation. Among the 10 environmental impacts considered, urea production contributed significantly to over eight environmental impacts, whereas the pollutant losses caused by its application contributed significantly to six environmental impacts. These findings reveal the dependence of the rice–wheat rotation system on the unsustainable use of N fertilizer and indicate that N fertilizer management practices should be further optimized to improve the environmental sustainability of grain production in the future.