Development of a sustainable and environment friendly crop production system depends on identifying effective strategies for the management of tillage and postharvest crop residues. Three-year (2004–2007) field study was initiated on two soil types to evaluate the effect of straw management (burning, incorporation and surface mulch) and tillage (conventional tillage and zero tillage) before sowing wheat and four nitrogen rates (0, 90, 120 and 150 kg N ha−1) on crop yields, N use efficiency, and soil fertility in the northwestern India. Effect of tillage and straw management on nitrogen transformation in soils was investigated in a laboratory incubation study. In sandy loam, grain yield of wheat with straw mulch-zero-till (ZT) was 7% higher compared to when residues were burnt-ZT but it was similar to straw burnt-conventional till (CT), averaged across 3 years. In silt loam, grain yield of wheat with straw mulch-ZT was 4.4% higher compared to straw incorporated-CT, but it was similar to straw burnt-CT. Response to N application was generally observed up to 150 kg N ha−1 except in 2004–2005 on sandy loam where N response was observed up to 120 kg N ha−1, irrespective of straw and tillage treatments. In sandy loam, RE was lower (49%) for straw burnt-ZT than in other treatments (54–56%). In silt loam, RE was higher in straw mulch-ZT compared with straw incorporation-CT (65 vs. 58%). In sandy loam, AE was higher in straw burnt-CT and straw mulch-ZT compared with the other treatments (19.2 vs. 16.9 kg grain kg−1 N applied). In silt loam, AE was lower in straw incorporation-CT than in other treatments (16.0 vs. 17.6 kg grain kg−1 N applied). Rice yield and N uptake were not influenced by straw and tillage management treatments applied to the preceding wheat. Recycling of rice residue (incorporation and surface mulch) compared with straw burning increased soil organic carbon and the availability of soil P and K. There was more carbon sequestration in rice straw mulch with zero tillage (25%) than in straw incorporation with conventional tillage (17%). Soil N mineralization at 45 days after incubation was 15–25% higher in straw retention plots compared with on straw burnt plots.