Although its mechanism of action, particularly under wetland condition, is not clearly understood, vermicompost, a good source of humus and plant nutrients, has been used as organic manure in many parts of the world in order to increase crop production. Here, an anaerobic incubation study and a field study were conducted to observe the nutrient release pattern from vermicompost and its influence on performance and nutrient uptake in wetland rice. Two contrasting soils, viz. highly weathered terrace soil and very young floodplain soil, were subjected to anaerobic incubation, while the field trial was conducted in the terrace soil with control (no amendments), mineral fertilizer, vermicompost (10 t ha−1) + mineral fertilizer, cow dung (10 t ha−1) + mineral fertilizer, vermicompost (20 t ha−1) + mineral fertilizer and vermicompost (local farmer’s practice) + mineral fertilizer treatments. Results showed that there were significant increases in nitrogen (N) and phosphorous (P) release in floodplain soil but not in terrace soil, suggesting that nutrient release from vermicompost is soil-dependent. The performance of Boro rice in terms of yield and yield attributes improved significantly in the case of the integrated application of vermicompost with mineral fertilizer. Specifically, combined application of mineral nutrients and vermicompost (10 t ha−1) significantly increased grain yield by 25% compared to the control treatment. We believe that this occurred due to an improvement in supply and subsequent uptake of nutrients, especially N and P. Altogether, our results suggest that vermicompost could increase crop performance under field conditions, and, although these effects may not be significant in short-term incubation studies, they may be even larger in floodplain soil.