In previous studies, iron-based nanomaterials, especially biochar (BC)-supported sulfidized nanoscale zero-valent iron (S-nZVI/BC), have been widely used for the remediation of soil contaminants. However, its potential risks to the soil ecological environment are still unknown. This study aims to explore the effects of 3% added S-nZVI/BC on soil environment and microorganisms during the remediation of Cd contaminated yellow-brown soil of paddy field. The results showed that after 49 d of incubation, S-nZVI/BC significantly reduced physiologically based extraction test (PBET) extractable Cd concentration (P < 0.05), and increased the immobilization efficiency of Cd by 16.51% and 17.43% compared with S-nZVI and nZVI/BC alone, respectively. Meanwhile, the application of S-nZVI/BC significantly increased soil urease and sucrase activities by 0.153 and 0.446 times, respectively (P < 0.05), improving the soil environmental quality and promoting the soil nitrogen cycle and carbon cycle. The results from the analysis of the 16S rRNA genes indicated that S-nZVI/BC treatment had a minimal effect on the bacterial community and did not appreciably alter the species of the original dominant bacterial phylum. Importantly, compared to other iron-based nanomaterials, incorporating S-nZVI/BC significantly increased the soil organic carbon (OC) content and decreased the excessive release of iron (P < 0.05). This study also found a significant negative correlation between OC content and Fe(II) content (P < 0.05). It might originate from the reducing effect of Fe-reducing bacteria, which consumed OC to promote the reduction of Fe(III). Accompanying this process, the redistribution of Cd and Fe mineral phases in the soil as well as the generation of secondary Fe(II) minerals facilitated Cd immobilization. Overall, S-nZVI/BC could effectively reduce the bioavailability of Cd, increase soil nutrients and enzyme activities, with less toxic impacts on the soil microorganisms.