Rhizodeposits have received considerable attention, as they play an important role in the regulation of soil carbon (C) sequestration and global C cycling and represent an important C and energy source for soil microorganisms. However, the utilization of rhizodeposits by microbial groups, their role in the turnover of soil organic matter (SOM) pools in rice paddies, and the effects of nitrogen (N) fertilization on rhizodeposition are nearly unknown. Rice (Oryza sativa L.) plants were grown in soil at five N fertilization rates (0, 10, 20, 40, or 60 mg N kg−1 soil) and continuously labeled in a 13CO2 atmosphere for 18 days during tillering. The utilization of root-derived C by microbial groups was assessed by 13C incorporation into phospholipid fatty acids. Rice shoot and root biomass strongly increased with N fertilization. Rhizodeposition increased with N fertilization, whereas the total 13C incorporation into microorganisms, as indicated by the percentage of 13C recovered in microbial biomass, decreased. The contribution of root-derived 13C to SOM formation increased with root biomass. The ratio of 13C in soil pools (SOM and microbial biomass) to 13C in roots decreased with N fertilization showing less incorporation and faster turnover with N. The 13C incorporation into fungi (18:2ω6,9c and 18:1ω9c), arbuscular mycorrhizal fungi (16:1ω5c), and actinomycetes (10Me 16:0 and 10Me 18:0) increased with N fertilization, whereas the 13C incorporation into gram-positive (i14:0, i15:0, a15:0, i16:0, i17:0, and a17:0) and gram-negative (16:1ω7c, 18:1ω7c, cy17:0, and cy19:0) bacteria decreased with N fertilization. Thus, the uptake and microbial processing of root-derived C was affected by N availability in soil. Compared with the unfertilized soil, the contribution of rhizodeposits to SOM and microorganisms increased at low to intermediate N fertilization rates but decreased at the maximum N input. We conclude that belowground C allocation and rhizodeposition by rice, microbial utilization of rhizodeposited C, and its stabilization within SOM pools are strongly affected by N availability: N fertilization adequate to the plant demand increases C incorporation in all these polls, but excessive N fertilization has negative effects not only on environmental pollution but also on C sequestration in soil.