It is critical to determine nitrogen use efficiency (NUE) to find to which extent higher rates of nitrogen can improve crop yield with effective management practices. Two-year field experiments were conducted to investigate yield and NUE of rice-wheat cropping system on saline-sodic soil. Treatments included were two nitrogen (N) application rates, i.e. 15% (N-115) and 30% (N-130) higher than the recommended rates for normal soil, along with gypsum at the rates of 50% (SGR(50)) and 100% (SGR(100)) of soil gypsum requirement. Results revealed relatively highest NO(3)(-)leaching for rice (161 and 145 mg L-1) and for wheat (97 and 93 mg L-1) during 2011-12 and 2012-13, respectively in N-130 + SGR(100). In this treatment, crop yield and NUE were the highest as compared to the other combinations. This resulted in reduction of yield gap by two-fold (53% to 26%) between saline-sodic and normal soils for rice-wheat. Interestingly, N-130 + SGR(100) proved most effective during the first year, however, N-100 + SGR(100) became more profitable in the subsequent year. Pearson correlation coefficients predicted significant positive correlation (p < 0.01) of yield and NUE with soil organic matter, cation exchange capacity and infiltration rate while inverse relationship was observed with electrical conductivity, pH, CaCO3, and bulk density. Based on data, it is concluded that the recommended N application together with SGR 100 would be environmental-friendly and economically viable option for rice-wheat cropping system in saline-sodic soils.