Many water-saving technologies have been developed to reduce water input and the associated irrigation costs. However, the influence of water management technologies on soil quality is unclear. Soil quality is fundamental to rice yield and sustainable productivity of ecosystems. Therefore, it is important to understand the effect of water management on soil quality and its linkage with rice yield. In this work, a field experiment was conducted to assess the influence of water management on soil physico-chemical properties, microbial biomass, bacterial community, and rice yield in paddy fields. Three water treatments were selected for the study, including flooding-rain-fed (F-RF), flooding-midseason drying-flooding (F-D-F), and continuous flooding (CF). Total nitrogen (TN), total phosphorus (TP), dissolved carbon content (DOC), available phosphorus (AP), nitrate nitrogen (NO3-), microbial biomass carbon (MBC), and microbial biomass nitrogen (MBN) contents were 11%, 20%, 29%, 30%, 11%, 183%, and 215% higher in F-D-F, respectively, than those in the CF (p < 0.05). Additionally, the bacterial diversity in F-D-F and CF was significantly higher compared to the F-RF (p < 0.05). Correspondingly, soil quality index (SQI) was higher in the F-D-F (0.8) than that of F-RF (0.53) and CF (0.5). Compared with the F-RF, water management remarkably altered bacterial community composition, with higher enrichment of anaerobic bacteria (such as Firmicutes and Chloroflexi) in flooding treatments (CF and F-D-F). Differences in the bacterial community were closely related to key soil quality indicators, such as AP. Parallel increases in soil quality and bacterial diversity resulted in increased rice yield in the F-D-F, which was 53% and 12% higher than that in F-RF and CF, respectively. Therefore, F-D-F is the suggested water management method because it can comprehensively improve soil microbial diversity, soil quality, and rice yield. KEY POINTS: • Water management changed bacterial community mainly via SMC (soil moisture content), TP, AP, and NO3-contents. • The F-D-F had greater SQI and higher rice yield in comparison with F-RF and CF.