As an aquatic fern-cyanobacteria symbiont, azolla has strong biological nitrogen (N) fixation ability, thus it can be used as high-quality green manure in rice fields to partially replace chemical nitrogen fertilizer in order to save energy and reduce N emissions. However, azolla is sensitive to ammonium concentration in the water, it is still unclear that the response of azolla to different nitrogen application rates under rice-azolla cropping system. A pot experiment was conducted to clarify the effects of different urea-N application rates on ammonia (NH₃) volatilization, biological N fixation (BNF) of azolla and rice yield, in which N application rate was setup as 0, 75, 150, 225, 300 kg/hm². The results show that: 1) Under the same N application level, azolla in rice field can significantly reduce the daily peak flux of NH₃ volatilization and the total amount of NH₃ volatilization. At N application rate of 225 kg/hm², rice-azolla co-culture leads to the greatest inhibition of the seasonal NH₃ volatilization, with a reduction of 83.2% compared with rice monoculture. 2) BNF rate and the total amount of BNF of azolla are negatively correlated with N application rate. BNF rate and the total amount of BNF of azolla at 300 kg/hm² is similar with that in no-N without azolla. 3) Rice-azolla co-culture improves rice yield compared to rice monoculture, except no-N group, and the maximal improvement is achieved at 225 kg/hm², with an increase of 21.2% compared with rice monoculture. In conclusion, rice-azolla cropping system can significantly inhibit NH₃ volatilization in rice fields and increase rice yield under fertilized conditions, BNF of azolla is inhibited with the increase of N application rate. Without sacrificing rice yield, rice-azolla cropping system can replace about 75 kg/hm² of chemical N fertilizer and can inhibit 83.2% of the NH₃ volatilization.