In the Taihu Lake region, excessive nitrogen (N) use in high-quality japonica rice cultivation presents sustainability and quality challenges. This study explores photosynthetic responses and yield outcomes under varying N rates, optimizing N use efficiency (NUE) and minimizing soil N surplus for sustainable high-quality rice production. Utilizing 'SuJing 4699' japonica rice, a two-year field study with N treatments ranging from 0 to 400 kg ha− 1 (increments of 80 kg ha− 1) was conducted. Measurements included dry matter accumulation, chlorophyll content, leaf area metrics, photosynthetic rates, and final yield determinations alongside N content, NUE, soil N surplus, and economic analysis. Optimal yields were achieved at 240 kg ha− 1 N, significantly improving photosynthetic performance and delaying chlorophyll degradation without yield gains at higher rates. This regime maximized NUE with 44.60 kg kg− 1 N recovery and 23.75 kg kg− 1 agronomic efficiency. Economic analysis supported these findings, with the highest net income and beneficial output-to-input ratios at this N level. The saturation point for yield increase was identified at a N application rate of 257.85 kg ha− 1, beyond which no significant increase in economic benefits was observed. Zero soil N surplus occurred at 127.44 kg ha− 1, highlighting a balance between environmental and economic factors. An N application rate between 240-257.85 kg ha− 1 optimizes photosynthetic efficiency, yield, and economic return in high-quality japonica rice while addressing soil N surplus concerns. This balance ensures sustainable and efficient rice production in the Taihu Lake region, aligning with environmental and agricultural sustainability objectives.