Rapeseed (Brassica napus L.) is a winter oil crop and biodiesel resource that has been widely cultivated in the southern part of China. Applying rapeseed residue (RSD) to summer rice fields is a common agricultural practice under rice−rapeseed double cropping systems. However, in Cd−contaminated paddy fields, the influence mechanisms of this agricultural practice on the migration and distribution of Cd fractions in soil are not clear. Therefore, a field experiment was carried out to analyse the changes in soil pH, organic matter (OM), microbial biomass carbon (MBC) and nitrogen (MBN), enzyme activity (urease (UA), acid phosphatase (ACP), and dehydrogenase (DH)), Cd distribution fractions, and Cd concentration in rice tissues after RSD application. The results showed that RSD treatment significantly increased the soil OM and MBC concentrations and UA, ACP, and DH activities, decreased the soil acetic acid−extractable fraction of Cd (ACI–Cd), and increased the reducible fraction of Cd (Red–Cd). The formation of stable organic complexes and chelates upon application of RSD is a result of the high affinity of Cd for soil OM. The activities of soil ACP, DH and MBC can well reflect Cd ecotoxicity in soil, particularly the DH activity. In addition, RSD application was helpful in inducing iron plaque formation. The “barrier” effect of iron plaque resulted in reduced Cd accumulation in different tissues of rice. The health risk of rice consumption also decreased as a result of RSD application; it decreased by 0.89–30.0% and 24.1–51.7% in the two tested fields. Overall, the application of RSD was increased soil OM, microbial biomass, and enzyme activity, and these changes was instrumental in reduce the risk of cadmium pollution in rice fields.