Acidification caused by excessive fertilization and heavy metals contamination are two prominent problems of agricultural soils. Diazotrophic cyanobacteria play important role in nitrogen (N) input in agricultural ecosystem. However, the effects of diazotrophic cyanobacteria on the growth of rice and heavy metal uptake by rice grain in acidified and heavy metal contaminated paddy soil remain unknown. In this study, a newly recorded diazotrophic cyanobacterium Aliinostoc sp. YYLX235 was isolated from acidified paddy soil. The results of pot experiment and in situ field plot experiment demonstrated that Aliinostoc sp. YYLX235 could promote rice grain yield and decrease cadmium (Cd) accumulation in rice grain. Nitrogen input by N₂-fixation and increase of bio-available phosphorus (P) by promotion of activity of soil phosphatase may be the main mechanisms for growth-promoting effects of Aliinostoc sp. YYLX235 on rice. Binding and immobilization of Cd through hydroxyl, carboxyl, and amino groups may be the reason for decrease of Cd accumulation in rice grain by Aliinostoc sp. YYLX235 inoculation. The results presented in this study suggest that diazotrophic cyanobacteria have great potential in safe cropping in acidified and Cd contaminated paddy soils.