Rice is the staple food for half of the world’s population but also has the largest water footprint among cereal crops. Alternate wetting and drying (AWD) is a promising irrigation strategy to improve paddy rice’s water productivity—defined as the ratio of rice yield to irrigation water use. However, its global adoption has been limited due to concerns about potential yield losses and uncertainties regarding water productivity improvements. Here, using 1,187 paired field observations of rice yield under AWD and continuous flooding to quantify AWD effects (ΔY), we found that variation in ΔY is predominantly explained by the lowest soil water potential during the drying period. We estimate that implementing a soil water potential-based AWD scheme could increase water productivity across 37% of the global irrigated rice area, particularly in India, Bangladesh and central China. These findings highlight the potential of AWD to promote more sustainable rice production systems and provide a pathway toward the sustainable intensification of rice cultivation worldwide.