Greenhouse gas emissions (GHG) and nutrient loss are considered to be critical environmental issues facing rice field ecosystems. Biochars (BCs), as carbon-rich materials with porous structures, large specific surface areas, and enriched surface functional groups, have shown great potential for improving environmental problems in rice fields and increasing rice yields. However, thus far, we still lack an adequate summary and review of the performance characteristics of BCs and their environmental behavior in paddy soils. In this paper, we critically review the positive effects of BC application on the growth and yield of rice, nutrient loss reduction, and GHG reduction. Biomass type, pyrolysis temperature, and modification method are considered to be the key factors that determine the performance characteristics of BCs. The application of BCs could promote rice yield and mitigate CO2, N2O, and CH4 emissions by improving soil physicochemical properties and microbial communities, providing nutrient sources, and reducing nutrient losses. Finally, this paper illustrates the potential ecological risks of BC application on paddy fields, including the risks of inconclusive research results and secondary pollution. These shortcomings need to be addressed in future research to ensure the sustainability of BC application.