Co-utilization of milk vetch as green manure (GM) and rice straw is an effective practice for reducing nitrogen (N) input while maintaining crop productivity in rice-based agroecosystems in southern China. The effects of soil carbon (C) and N pools and their fractions under green manuring and rice straw return, combined with reduced N fertilization remain to be clarified. A four-year field experiment was carried out to explore the effects of synergistic utilization of GM and rice straw (GMS) on rice yield, soil C and N fractions, and their contributions to rice productivity. The study demonstrated that compared with winter fallow (WF), GMS increased rice yield by 20.3% under 40% reduction in N fertilization (N60). GM application increased soil total N content by 16.5% and 18.0% significantly relative to WF under N0 and N60, respectively. GMS treatment demonstrated improvements in the soil organic C pool and enhanced soil N activity. Compared with WF, soil organic C, mineral-associated organic C and particulate organic C under GMS increased by 11.1% and 24.9%, 31.3% and 13.8%, 13.1% and 47.3% at N0 and N60 levels, respectively. Under N60, GMS increased heavy-fraction organic C content by 42.6% while reducing light-fraction organic C content by 28.0% compared to WF, thereby enhancing soil C pool stability. Regarding soil N fractions, GMS increased particulate organic N content by 60.8% and 79.3%, and mineral-associated organic N content by 89.7% and 43.4% at N0 and N60 levels, respectively. Under N60, GMS reduced heavy-fraction organic N content while increasing light-fraction organic N content, thereby enhancing soil N availability. Based on the results of Mantel tests and random forest prediction, our analysis found that N and particulate organic C served as the key factors affecting rice yield. In conclusion, GMS combined with 60% of the conventional N rate enhanced rice yield by mediating soil C sequestration and N availability, proving to be an effective strategy for improving soil fertility and ensuring food security in the rice-growing region of southern Jiangsu, China.