Rice-wheat system is a major dominating cropping system of India. High yields of the irrigated Rice-wheat system have resulted in production of huge quantities of crop residues. Burning of rice straw is common in north-west India causing nutrient losses and serious air pollutions affecting human health, climate change and global warming. To avoid straw burning, innovations in crop residue management should assist in achieving sustainable productivity and allow farmers to reduce nutrient and water inputs, and reduce risk due to climate change. Crop residues contain significant quantities of plant nutrients and their judicious application will have positive effect on nutrient management in rice wheat system. Long-term studies of the residue recycling have indicated improvements in physical, chemical and biological health of soil. Other plausible option of crop residues management lies in utilizing a portion of surplus residue are incorporate in to soil which improve soil health, increase nutrient use efficiency and minimize air pollution and other i.e. mushroom cultivation as converting of inedible crop residues into valuable food, surface mulch as conservation of soil moisture, temperature and control of weed emergence, bio-fuel and compost production. Residue decomposition in soil substantially increases the soil organic carbon and other nutrient. In this review authors have discussed residue potential and possible options for with efficient management of crop residues in the rice wheat cropping system.