Nitrogen (N) is an essential macronutrient for crop growth and yield. Improving the N use efficiency (NUE) of crops is important to agriculture. However, the molecular mechanisms underlying NUE regulation remain largely elusive. Here we report that the OsNLP3 (NIN‐like protein 3) regulates NUE and grain yield in rice under N sufficient conditions. OsNLP3 transcript level is significantly induced by N starvation and its protein nucleocytosolic shuttling is specifically regulated by nitrate. Loss‐of‐function of OsNLP3 reduces plant growth, grain yield, and NUE under sufficient nitrate conditions, whereas under low nitrate or different ammonium conditions, osnlp3 mutants show no clear difference from the wild type. Importantly, under sufficient N conditions in the field, OsNLP3 overexpression lines display improved grain yield and NUE compared with the wild type. OsNLP3 orchestrates the expression of multiple N uptake and assimilation genes by directly binding to the nitrate‐responsive cis‐elements in their promoters. Overall, our study demonstrates that OsNLP3, together with OsNLP1 and OsNLP4, plays overlapping and differential roles in N acquisition and NUE, and modulates NUE and the grain yield increase promoted by N fertilizer. Therefore, OsNLP3 is a promising candidate gene for the genetic improvement of grain yield and NUE in rice. Summary Statement Crop nitrogen use efficiency (NUE) is an important agronomic trait. But the molecular mechanisms underlying NUE regulation are not well understood. This study reveals that rice NIN‐like protein 3 (OsNLP3) regulates NUE and grain yield especially under N sufficient conditions and is a promising candidate gene for improving grain yield and NUE in rice.