Paddy field, being a man-made wetland, is recognized as one of the major sources of global methane (CH4) emission. Since China has the second-largest area of rice cultivation in the world, it is important to develop valid and reliable strategies to reduce CH4 emission and sustain rice productivity in Chinese paddy fields. In this study, we applied steel slag fertilizer, a by-product of steel industry with a high concentration of active iron (Fe), at rates of 0, 2, 4, and 8 Mg ha−1 in subtropical rice (Oryza sativa L.) paddy fields in China to assess the effect of steel slag amendment on CH4 emissions as well as rice growth and yield characteristics. Results showed that the Fe concentrations in paddy soils significantly increased with the application levels of steel slag fertilizer. Steel slag amendment in paddy fields largely reduced the CH4 production rate, resulting in a decrease in the overall CH4 emission rate. In response to the applications of steel slag at a rate of 2, 4 and 8 Mg ha−1, total CH4 emission during rice cultivation decreased by 26.6, 43.3 and 49.3 %, respectively. Furthermore, steel slag amendment had a significant, positive effect on the rice grain yield and the percentage of ripened grain, most probably due to the increased availability of inorganic nutrients such as silicate and manganese. Our results suggest that steel slag can be an effective soil amendment for reducing CH4 emissions as well as increasing rice productivity in subtropical paddy fields in China.