Crop residue burning and imbalanced use of chemical fertilizers in intensive cereal–cereal rotations are present ecological threats in any agro‐ecosystem of the world. Therefore, identification of best suitable agricultural practices can be a feasible option. The present experiment was initiated in 2013 and consisted of four residue levels (0, 2, 4, and 6 Mg ha−1) and five potassium (K) levels (0, 50, 100, 150% recommended dose of K and 50%RDK+K solubilizing bacteria, KSB). Crop residue (CR) and K management significantly improve crop and soil quality associated parameters. Among the treatments, maximum increase in crop growth, physiological parameters, grain yield, quality aspects, and water productivity are recorded with the application of 4–6 Mg ha−1 CR. Application of 50%RDK+KSB also significantly increases crop and soil related parameters. Soil quality indicators (bulk density, pH, electrical conductivity, and available micronutrients) do not vary significantly with CR and K management. Change in soil organic carbon status, soil enzymes, and potassium‐solubilizing bacterial count are significantly increased with 4–6 Mg ha−1 CR and application of 50%RDK+KSB, and this is in accordance with correlation study carried out. Therefore, it is concluded that CR retention (4–6 Mg ha−1) and reduction of inorganic K fertilizer by 50% and inoculation of KSB enhance the soil quality indicators and thereby improve crop growth, physiological parameters, grain yield, and quality aspects along with water productivity under zero till maize–wheat rotation.