In Nepal, rice is the major staple food crop and is ranked first as a cultivated crop. Nitrogen is one of the most important factors limiting its yield. There has been an overuse of nitrogen fertilizer in rice fields resulting in low N use efficiency and high loss of nitrogen. A field experiment was carried out on acidic sandy loam soil of the Directorate of Agricultural Research, Gandaki, Lumle, from June to November 2016 and 2017 to evaluate the performance of cold-tolerant rice (Lumle-2) and nutrient use efficiency as affected by various levels of nitrogen application. The experiment was laid out in a randomized complete block design with five different level of nitrogen as treatments (0, 50, 100, 130, 150 Kg N ha-1) and replicated four times. Phosphorus, potassium and FYM were applied at the recommended dose. A significantly marked increment in grain yield was noticed in both years as the nitrogen level increases up to 130 Kg N ha-1. However, when the nitrogen dose exceeded 130 Kg N ha-1 have decreasing effect in grain yield, straw yield and NUE. The productivity (4.35 t ha-1) and NUE of cold tolerant rice (Lumle-2) can be improved significantly by applying an optimum level of N fertilizer up to 130 Kg N ha-1.