An experiment was conducted at Agricultural Research Station (Paddy), Sirsi during kharif seasons of 2009 to 2011 (three years) to study the effect of dual cropped Azolla and its time of release on yield of rice crop and on soil fertility. The treatments consist of four levels of Azolla release time (A₁ - Two to three weeks before planting; A₂ - At 15 days after planting (DAP); A₃ - At 30 DAP and A₄ - At 45 DAP) and two levels of nitrogen (N 1 - 50% recommended dose of nitrogen (RDN) and N₂ - 100% RDN). These treatment combinations were compared with one control i.e., without Azolla but with recommended dose of nitrogen (75 kg/ha). The results indicate that the differences were not significant with respect to grain yield, straw yield and net returns due to time of release of Azolla in paddy as dual crop (inter crop). The interaction effect showed that the net returns realised with all combinations of Azolla release time and 100% recommanded dose of nitrogen (RDN) levels was significantly higher as compared to that that obtained with recommended package of practice.