C4 plants have the inherent capacity to concentrate atmospheric CO2 in the vicinity of RuBisCo, thereby increasing carboxylation, and inhibiting photorespiration. Carbonic anhydrase (CA), the first enzyme of C4 photosynthesis, converts atmospheric CO2 to HCO3−, which is utilized by PEPC to produce C4 acids. Bioengineering of C4 traits into C3 crops is an attractive strategy to increase photosynthesis and water use efficiency. In the present study, we isolated the PEPC gene from the C4 plant Setaria italica and transferred it to C3 rice. Overexpression of SiPEPC resulted in a 2-6-fold increment in PEPC enzyme activity in transgenic lines with respect to non-transformed control. Photosynthetic efficiency was enhanced in transformed plants, which was associated with increased ФPSII, ETR, lower NPQ, and higher chlorophyll accumulation. Water use efficiency was increased by 16–22% in PEPC transgenic rice lines. Increased PEPC activity enhanced quantum yield and carboxylation efficiency of PEPC transgenic lines. Transgenic plants exhibited higher light saturation photosynthesis rate and lower CO2 compensation point, as compared to non-transformed control. An increase in net photosynthesis increased the yield by (23–28.9%) and biomass by (24.1–29%) in transgenic PEPC lines. Altogether, our findings indicate that overexpression of C4-specific SiPEPC enzyme is able to enhance photosynthesis and related parameters in transgenic rice.