The external application of nitrogen (N) fertilizers is an important practice for increasing crop production. However, the excessive use of fertilizers significantly increases production costs and causes environmental problems, making the improvement of crop N-use efficiency (NUE) crucial for sustainable agriculture in the future. Here we show that the rice (Oryza sativa) NUE quantitative trait locus DULL NITROGEN RESPONSE1 (qDNR1), which is involved in auxin homeostasis, reflects the differences in nitrate (⁠ $NO3−$⁠) uptake, N assimilation, and yield enhancement between indica and japonica rice varieties. Rice plants carrying the DNR1^indica allele exhibit reduced N-responsive transcription and protein abundance of DNR1. This, in turn, promotes auxin biosynthesis, thereby inducing AUXIN RESPONSE FACTOR-mediated activation of $NO3−$ transporter and N-metabolism genes, resulting in improved NUE and grain yield. We also show that a loss-of-function mutation at the DNR1 locus is associated with increased N uptake and assimilation, resulting in improved rice yield under moderate levels of N fertilizer input. Therefore, modulating the DNR1-mediated auxin response represents a promising strategy for achieving environmentally sustainable improvements in rice yield.