The effects of a controlled release urea (CRU) on concentration of N in root zones, activities of N metabolism enzymes in leaves, and N use efficiency of rice (Oryza sativa L.) grown on a silt loam soil in lysimeters were investigated. The entire amount (100–300 kg N ha−1) of the CRU was incorporated into a plug for growing the rice seedlings while the regular urea was split into three applications (the standard practice). Results indicated that the N release of CRU closely matched the N requirements of the rice, and the commingling of the CRU with the rice seeds increased N concentration within the root zone and enhanced the activities of glutamine synthetase (GS), glutamine 2‐oxoglutarate amidotransferase (GOGAT) and nitrate reductase (NR) in leaves. At the same N rate, the apparent N use efficiency of the CRU applied at 300 kg N ha−1 was 27.6 and 22.9% higher than that of conventional urea treatment in 2007 and 2008, respectively. Although the CRU at 200 kg N ha−1 supplied one‐third less N than the urea at 300 kg N ha−1, the CRU produced 3 to 5.9% more grain than the urea. Placing the CRU with rice seeds without additional fertilizer application during the entire growing season significantly increased N availability in soils and improved rice growth and led to use of less N fertilizers for greater rice grain yield.