The ground cover rice production system (GCRPS) has been proposed as a potential solution to alleviate seasonal drought and early low-temperature stress in hilly mountainous areas; clarifying its impact on crop growth is crucial to enhance rice productivity in these areas. A two-year (2021–2022) field experiment was conducted in the hilly mountains of southwest China to compare the effects of the traditional flooding paddy (Paddy) and GCRPS under three different nitrogen (N) management practices (N1, zero-N fertilizer; N2, 135 kg N ha−1 as a urea-based fertilizer; and N3, 135 kg N ha−1 with a 3:2 base-topdressing ratio as urea fertilizer for the Paddy or a 1:1 basal application ratio as urea and manure for GCRPS) on soil water storage, soil mineral N content and crop growth parameters, including plant height, tiller numbers, the leaf area index (LAI), aboveground dry matter (DM) dynamics and crop yield. The results showed that there was a significant difference in rainfall between the two growth periods, with 906 mm and 291 mm in 2021 and 2022, respectively. While GCRPS did not significantly affect soil water storage, soil mineral N content, and plant height, it led to a reduction in partial tiller numbers (1.1% to 31.6%), LAI (0.6% to 20.4%), DM (4.4% to 18.8%), and crop yield (7.4% to 22.0%) in 2021 (wet year) compared to the Paddy. However, in 2022 (dry year), GCRPS led to an increase in tiller numbers (13.7% to 115.4%), LAI (17.3% to 81.0%), DM (9.0% to 62.6%), and crop yield (2.9% to 9.2%) compared to the Paddy. Structural equation modeling indicated that GCRPS significantly affected tiller numbers, plant height, LAI, DM, and productive tiller numbers, which indirectly influenced crop yield by significantly affecting tiller numbers and productive tiller numbers in 2022. Overall, the effects of GCRPS on soil water and N dynamics were not significant. In 2021, with high rainfall, no drought, and no early, low-temperature stress, the GCRPS suppressed crop growth and reduced yield, while in 2022, with drought and early low-temperature stress and low rainfall, the GCRPS promoted crop growth and increased yield, with tiller numbers and productive tiller numbers being the key factors affecting crop yield.