Climate change and diminishing resources are the major challenges in sustainable rice production. The aerobic rice system can be a transformational approach to replace conventional rice in the face of climate change and scarcity of resources due to its high input-use efficiency. However, it could not be adapted widely yet due to several challenges like higher weed infestation and low nitrogen (N) use efficiencies. This transformed system can only be adapted at a wider scale through investigation of associated constraints and risks and provision of potential adjustive measures. Aerobic rice crop failure can be reduced if the availability of suitable and stress-resistant cultivars with early improved vigour, and short-duration characteristics are ensured for maintaining the reproductive capability under resource stressed environment. This transformed rice system exhibits limited response to applied N because of increased losses due to higher volatilization and rapid coupled nitrification-denitrification processes under alternate wetting and drying systems. Shifting from the flooded to aerobic rice system bringing changes in crop water demand, organic matter (OM) turnover, N dynamics, weed flora, and greenhouse gases (GHGs) emissions. Along with N-losses, continuous monocropping, higher weed infestation, weedy rice emergence, nitrous oxide (N2O) emissions, nutrient disorders, higher prevalence of pathogens and diseases, increased panicle sterility, and an increase in soilborne pathogens lodging are other major constraints negatively impacting the widespread adaptation of aerobic rice. This article reviews the climate change status, its associated impacts on the sustainability of traditional rice systems, and the rationale for transforming from traditional to aerobic rice systems. Furthermore, it describes the major challenges associated with the aerobic rice system, thereby presenting management strategies ensuring its wider adaptation for sustainable rice production in the face of projected climate change and scarcity of resources.