Water shortage is increasingly limiting the luxury use of water in rice cultivation. In this study, non-flooded mulching cultivation of rice only consumed a fraction of the water that was needed for traditional flooded cultivation and largely maintained the grain yield. We also investigated the growth and development of rice plants and examined grain yield formation when rice was subjected to non-flooded mulching cultivation. One indica hybrid rice combination was grown in a field experiment and three cultivation methods, traditional flooding (TF), non-flooded straw mulching cultivation (SM) and non-flooded plastic mulching cultivation (PM), were conducted during the whole season. Grain yield showed that there was no significant difference between SM and TF rice, but the grain yield of SM cultivation was significantly higher than that of PM. The tiller numbers were inhibited in the early stage under non-flooded mulching cultivation, but the situation was reversed at the later period. Both SM and PM rice reduced dry matter accumulation of shoot, but increased root dry weight,enhanced the remobilization of assimilates from stems to grains and increased the harvest index. During the middle and later grain filling period, mulched plants showed a faster decrease in chlorophyll concentrations, photosynthetic rates of flag leaves and root activity than TF rice, indicating that non-flooded mulching cultivation enhanced plant senescence. In comparison, SM treatment produced higher grain yield and, more dry matter accumulation and panicle numbers than the PM treatment. The overall results suggest that high yield of non-flooded mulching cultivation of rice can be achieved with much improved irrigational water use efficiency.