Chinese milk vetch is an efficient approach to reduce Cd accumulation in rice, nevertheless, its reduction mechanism is not well understood. In this study, we investigated the rice grain Cd, soil properties and microbial community in a Cd-polluted paddy field amended with milk vetch residue (MV) or without (CK) during rice growth period. We found that milk vetch residue averagely decreased the Cd content in rice grain by 45%. Decrease of Cd in rice mainly attributed to the inhibition of Cd activation by milk vetch residue at heading stage probably by the formation of HA-Cd (Humic Acid) and CdS. Increased pH and organic matter (OM) promoted the reduction of available Cd. In addition, nonmetric multidimensional scaling (NMDS) analysis revealed that microbial community structure was significantly different between MV and CK treatment (r = 0.187, p = 0.002), and the core functions of differentially abundant genera were mainly associated with N-cycling, organic matter degradation and sulfate-reducing. The application of milk vetch residue increased the abundance of sulfate-reducing bacteria (SRB) by 8–112% during the rice growth period, which may involve in promoting the transformation of Cd to a more stably residual Cd (CdS). Canonical correspondence analysis (CCA) and mantel test analysis indicated that available K (p = 0.004) and available N (p = 0.005) were the key environmental factors of shaping the SRB. Altogether, changes in soil properties affected microbial structure and functional characteristics, especially the response of SRB in MV treatment would provide valuable insights into reducing the bioavailability of Cd in soil.