Water saving techniques, such as alternate wetting and drying (AWD), are becoming a necessity in modern rice farming because of climate change mitigation and growing water use scarcity. Reducing water can vastly reduce methane (CH4) emissions; however, this net climate benefit may be offset by enhanced carbon dioxide (CO2) emissions from soil. The main aims of this study were: to determine the effects of AWD on yield and ecosystem C dynamics, and to establish the underlying mechanistic basis for observed trends in net ecosystem C gain or loss in an Italian rice paddy. We investigated the effects of conventional water management (i.e. conventionally flooded paddy; CF) and AWD on biomass accumulation (aboveground, belowground, grain), key ecosystem C fluxes (net ecosystem exchange (NEE), net primary productivity (NPP), gross primary productivity (GPP), ecosystem respiration (ER), autotrophic respiration (RA), heterotrophic respiration (RH)), and soil organic matter (SOM) decay for four common commercial European rice cultivars. The most significant finding was that neither treatment nor cultivar affected NEE, GPP, ER or SOM decomposition. RA was the dominant contributor to ER for both CF and AWD treatments. Cultivar and treatment affected the total biomass of the rice plants; specifically, with greater root production in CF compared to AWD. Importantly, there was no effect of treatment on the overall yield for any cultivar. Possibly, the wetting-drying cycles may have been insufficient to allow substantial soil C metabolism or there was a lack of labile substrate in the soil. These results imply that AWD systems may not be at risk of enhancing soil C loss, making it a viable solution for climate change mitigation and water conservation. Although more studies are needed, the initial outlook for AWD in Europe is positive; with no net loss of soil C from SOM decomposition, whilst also maintaining yield.