The genetic improvement of nitrogen use efficiency (NUE) of crops is vital for grain productivity and sustainable agriculture. However, the regulatory mechanism of NUE remains largely elusive. Here, we find that the rice Grain number, plant height, and heading date7 (Ghd7) gene genetically acts upstream of ABC1 REPRESSOR1 (ARE1), a negative regulator of NUE, to positively regulate nitrogen utilization. As a transcriptional repressor, Ghd7 directly binds to two Evening Element-like motifs in the promoter and Intron 1 of ARE1, likely in a cooperative manner, to repress its expression. Ghd7 and ARE1 display diurnal expression patterns in an inverse oscillation manner, mirroring a regulatory scheme based on these two loci. Analysis of a panel of 2,656 rice varieties suggests that the elite alleles of Ghd7 and ARE1 have undergone diversifying selection during breeding. Moreover, the allelic distribution of Ghd7 and ARE1 is associated with the soil nitrogen deposition rate in East Asia and South Asia. Remarkably, the combination of the Ghd7 and ARE1 elite alleles substantially improves NUE and yield performance under nitrogen-limiting conditions. These results define a Ghd7-ARE1-based mechanism regulating nitrogen utilization, which may represent useful targets for the genetic improvement of rice nitrogen utilization in breeding.