A long-term rice-wheat experiment (LTE) initiated in 1963 at the Kyushu Agricultural Experiment Station, in Fukuoka, Japan was utilized to examine the changes in soil microbiological properties related to nutrient mineralization, C use efficiency and the decomposable C fraction of soil organic matter that are needed for assessing soil quality and system sustainability. Soil samples were collected after rice harvest in 2003 from the organic residue treatments and unfertilized control, air-dried, and incubated for 1 month under aerobic [50% water-filled pore space (WFPS)] and flooded conditions prior to the analysis of microbial biomass C (MBC), soil respiration, and potential mineralizable N (PMN). Total C (TC), total N (TN), organic C (OC), cation exchange capacity (CEC), and hot water-extractable C (HWEC) were determined from air-dried soils. Significant increases in the decomposable C fraction, potential mineralizable N, CEC, the size and activity of microbial biomass, and C use efficiency in residue-amended soil provide clear evidences of soil quality improvement over a long-term. Results have also quantitatively shown that a much higher accumulation of C (23%) and N (72%) from rice residues was achieved by composting as compared with the 7% C- and 33% N accumulation from uncomposted rice straw. In treatments without inorganic N fertilizer, grain yield was significantly correlated with total organic C, HWEC, MBC (at 50% WFPS), basal soil respiration (at 50% WFPS) and PMN. These results show that alternative on-farm management strategies should be considered for the maintenance and improvement of the soil's resource base.