Globally, climate changes have significantly shifted the phenological phases and stages of rice, altered the duration of the growing season and negatively affected rice productivity due to flooding and drought. However, in the present study, the positive and negative impacts of inter‐annual climate variability on rice crops during phenological stages in agro‐climatic zones of Punjab for the period from 1989 to 2018. Initially, first difference approach was applied to minimise the impact of technological factors. Then, skewness and kurtosis tests were used to check the normalisation of the data. The standardisation method was used to normalise the data. Pearson correlation was used to determine the significant effects of climate variables on rice yield. The residuals were formed to confirm the effects of inter‐annual climate variability on rice yield in the phenological phases. The analysis revealed that a high variability of rice yields was investigated in the western region compared to the southern and western regions. The results showed a negative impact of heavy rainfall (flooding) on the years with low yields (2010, 2013 and 2016) in the Central region. Similarly, the years with low rice yields (1996, 2010, 2013 and 2014) in the Southern region were negatively affected by flooding at the time of sowing. A positive effect of rainfall was observed in the years with high rice yields (1995, 2002, 2009 and 2018) in the Western region. In contrast, the low‐yielding years 1994, 2003 and 2010 were negatively affected by flooding in the same years during the tillering stage. A high interannual maximum temperature variability was analysed in the Southern > Western > Central regions, leading to yield losses due to biotic stress during tillering and stem elongation stages. This is due to the immense reason of drought stress. The minimum temperature negatively affects the low‐yield years (2001, 2008, 2013 and 2016) in the central zone and the low‐yield years (2014, 2015 and 2016) in the southern zone during the reproductive stage. This research will help to develop new rice varieties that are more productive at high temperatures and require less water, leading to sustainable development in arid and semi‐arid regions.