Increased use of chemical fertilizers has unfortunately resulted in decreasing soil organic matter (SOM) because of reduced attention to organic recycling in Sri Lanka. The value of in-situ organic manuring with rice straw was evaluated in combination with mineral nitrogen to reduce nitrogen losses. Addition of straw also increased the number and activity of N-2-fixing micro-organisms. Straw application increased the rice yield by 8-15% in different zones of Sri Lanka. The amount of organic matter and nutrients in the soil increased with straw application. On three Hapludult paddy fields (1.31% C, 0.17% N), six treatment combinations were applied: 30 and 60 kg Nka, 0, 5 and 8 t straw/ha and a basal dressing of P, K, Zn and Cu. Cultivar BG94-1 was transplanted at 15 x 15 cm and 3 plants/hill. Soil samples were taken 0, 0.5, 1, 2, 4, 6, 8 and 11 weeks after transplanting (WAT) for determination of NH4+ content. Plant and yield parameters were recorded 0, 2, 4, 6, 7, 8 and 11 WAT. Within a week, an increase in mineralization was observed as a result of the 'priming' effect of the added fertilizer and straw. A small increase was also observed after the second fertilizer application at maximum tillering (4 WAT). The available soil nitrogen was higher with increasing amounts of straw, thus less losses occurred. This was linked with the soil fertility status of the field: when soil N was low, the effect was not seen, when SOM was low, all straw applications enhanced the availability equally. The highest N uptake was possible with the highest N fertilizer and straw dose. Low N and high straw reduced N uptake. A sharp increase in N uptake was observed 6-7 WAT. A mineral N application at 4 WAT might be too early. The number of tillers was well correlated with N content of the plant 8 WAT. The highest yield was obtained with 30 kg N and 5 t straw/ha. Higher straw levels reduced yield. A lower C/N ratio in the field increased the yield.