Monochoria vaginalis (Burm. f.) Kunth is an annual weed commonly found in paddy fields. Understanding the effects of M. vaginalis on the yield and economics of paddy rice (Oryza sativa L.) is essential for integrated weed management. Here, a field experiment was conducted over two consecutive years (2017–2018) to determine the effects of different densities of M. vaginalis (0, 1, 4, 8, 12, 16, 20, and 24 plants m–2) on yield losses, economic thresholds, and gross returns in paddy rice. The results showed that a higher density of M. vaginalis exhibited greater inhibitory effects on plant height, tiller number per plant, and adjusted gross returns in both early and late rice. The inhibitory effects on spike number per plant, filled grains per panicle, and 1,000‐kernel weight were also significant, although lesser than those observed on the other yield traits. The economic threshold of M. vaginalis under manual weeding varied from 2.80 to 4.44 plants m–2, whereas the threshold levels under herbicide application ranged between 0.71 and 1.03 plants m–2 in the 2 yr. Averaged across all other factors, the adjusted gross returns decreased by 45.0% with increasing M. vaginalis density from 0 to 24 plants m–2. Taking into account the economic thresholds and gross returns, irrational use of herbicides should be prevented for weed management in paddy fields. This study provides useful data for reducing the use of chemical herbicides, saving the costs of weed management practices, and protecting the environment of farmland ecosystems.