Light deficiency is a growing abiotic stress in rice production. However, few studies focus on shading effects on grain yield and quality of rice in East China. It is also essential to investigate proper nitrogen (N) application strategies that can effectively alleviate the negative impacts of light deficiency on grain yield and quality in rice. A two-year field experiment was conducted to explore the effects of shading (non-shading and shading from heading to maturity) and panicle N application (N_DP, decreased panicle N rate; N_MP, medium panicle N rate; N_IP, increased panicle N rate) treatments on rice yield- and quality-related characteristics. Compared with non-shading, shading resulted in a 9.5–14.8% yield loss (P<0.05), mainly due to lower filled-grain percentage and grain weight. N_MP and N_IP had higher (P<0.05) grain yield than N_DP under non-shading, and no significant difference was observed in rice grain yield among N_DP, N_MP, and N_IP under shading. Compared with N_MP and N_IP, N_DP achieved less yield loss under shading because of the increased filled-grain percentage and grain weight. Shading reduced leaf photosynthetic rate after heading, as well as shoot biomass weight at maturity, shoot biomass accumulation from heading to maturity, and nonstructural carbohydrate (NSC) content in the stem at maturity (P<0.05). The harvest index and NSC remobilization reserve of N_DP were increased under shading. Shading decreased (P<0.05) percentages of brown rice, milled rice, head rice, and amylose content while increasing (P<0.05) chalky rice percentage, chalky area, chalky degree, and grain protein. N_MP demonstrated a better milling quality under non-shading, while N_DP demonstrated under shading. N_DP exhibited both lower chalky rice percentage, chalky area, and chalky degree under non-shading and shading, compared with N_MP and N_IP. N_DP under shading decreased amylose content and breakdown but increased grain protein content and setback, contributing to similar overall palatability to nonshading. Our results suggested severe grain yield and quality penalty of rice when subjected to shading after heading. N_DP improved NSC remobilization, harvest index, and sink-filling efficiency and alleviated yield loss under shading. Besides, N_DP would maintain rice’s milling, appearance, and cooking and eating qualities under shading. Proper N management with a decreased panicle N rate could be adopted to mitigate the negative effects of shading on rice grain yield and quality.