The yield-increasing mechanism of an optimized nitrogen fertilizer application (OFA) in rice was reported in this work through a three-year test. Results showed that the number of branches and spikelets increased, panicle length, the diameter and vascular bundle number of panicle-neck internode improved with OFA. Under the condition of OFA, high effective leaf areas, especially for the flag and the second upper leaf areas, increased, the net photosynthetic rate of the upper three leaves promoted, so the photosynthetic productivity went up by a large margin; moreover, the content of soluble protein and chlorophyll of leaf also increased, and the content of soluble sugar and malondialdehyde (MDA) decreased, as a result in slowing down the senescence speed in leaves, and increasing the photosynthetic time. Gene expression level, including MOC1, LAX1, SP1, GS1;1, were up-regulated obviously in different panicle initiation stage under OFA condition, which conduced to the increase in the secondary branches and spikelets. So we concluded that the changes in organ formation and panicle structure, together with the responses in physiological and molecular made the photosynthetic area, rate and time all increased with OFA, which provided the matter basis for the big panicle development, consequently, got a higher yield.