We evaluated the effects of ultrasound-assisted hydration (UH) on process time and concentration of phenolic compounds during the parboiling of native Pantanal paddy rice (Oryza latifolia) in comparison to conventional hydration (CH). This rice variety is produced by indigenous and riverside communities in the Pantanal biome. The UH increased water absorption, with a 58% average reduction in process time. Irreversible changes in the physical structure of rice (visible to the naked eye and in electronic microscopy images) confirmed that the grains parboiled faster. The Peleg model satisfactorily predicted the moisture uptake experimental data (R2 > 0.94). The CH significantly reduced the concentration of total phenolic compounds (TPC) (16–19%), total flavonoids (TF) (30–40%), and antioxidant capacity (AA) (20–39%) of paddy rice hydrated at 65–75 °C. In turn, the UH caused minimal loss of TPC (<1%), lower reduction of TF (∼7%) and AA (4–12%). The results indicate that ultrasound enhances parboiling processes by increasing mass transfer rates during hydration, consequently shortening processing time, reducing the energy demand, and preserving the nutritional quality of rice. The preservation of phenolic compounds during parboiling via ultrasound-assisted hydration (UH) is notable because the significant loss of these compounds in conventional hydration (CH). Therefore, parboiled rice falls short of being classified as a functional food. By preserving the phytochemicals during parboiling, the proposed process here may contribute to classifying Pantanal rice as a functional food, enabling income generation for local communities through the commercialization of parboiled native rice.