To determine nitrogen (N) fate and environmental impact of applying anaerobic digestion slurry (ADS) to rice paddy (Oryza sativa L.), a field experiment was established using three treatments based on contrasting N application rate. The ADS (with ammonium-N accounting for >80 % of total N) treatment at a conventional application rate of 270 kg N ha-1 was compared to a negative control (no N fertilizer) and a positive control of urea applied at 270 kg N ha-1. The N budget showed the following distribution of applied N from ADS and urea: 41.3 ± 5.1 % for ADS and 36.6 ± 4.4 % for urea recovered by the rice plant (including straw, grain, and root), 16.4 ± 3.7 % for ADS and 7.4 ± 1.8 % for urea lost via ammonia volatilization, 0.26 ± 0.15 % for ADS and 0.15 ± 0.12 % for urea lost by direct N2O emission, 1.9 ± 0.5 % for ADS and 2.3 ± 0.8 % for urea leached downward, 0.70 ± 0.15 % for ADS and 0.67 ± 0.12 % for urea discharged with floodwater drainage, and 39.4 ± 8.4 % for ADS and 53.0 ± 9.1 % for urea retained by soil or lost by N2 emission. Compared to urea application, ADS application impacts the environment mainly through gaseous N losses rather than water N losses. ADS application had a positive impact on rice grain yield and reduced chemical fertilizer use. Considering the wide distribution of paddy fields and the ever-increasing quantities of ADS, ADS may serve as a valuable N source for rice cultivation, although mitigating ammonia and N2O losses should be further investigated. © 2012 Springer-Verlag Berlin Heidelberg.