High‐density planting is a strategy employed to save resources in crop production, particularly in environmentally friendly double‐season rice (Orvza sativa L.) cropping, where it promotes high grain yield and reduces required nitrogen (N) input. We conducted a field experiment in 2014–2018 to detect the combined effect of increased seedling density and reduced N input on early rice grain yield and N use efficiency (NUE). The higher basic seedling with low N input treatment (T2) had an average grain yield of 7.01 t ha−1, which was 16.3% greater than that of the control (CK). There was a strong linear relationship between grain yield and panicles m−2 (R2 = .82, P < .001). Grain yield increased significantly with above‐ground biomass before the full‐heading stage (R2 = .79, P < .001), which in turn promoted an increase in panicles m−2 (R2 = .85, P < .001). Mean agronomic efficiency (AE) in the T2 treatment was 34.3 kg kg−1 N, which was 48.1% higher than that in the CK treatment. Therefore, increasing seedling density from 62.5 to 176 seedlings number m−2 while reducing inorganic N input in the early season resulted in significantly higher grain yield in hand‐transplanted rice production. Our results indicate that dense planting with N reduction could improve early rice grain yield and enhance NUE.