To understand the impact of residue and tillage management on crop productivity of rice and barley (including grain yield) and soil fertility in a tropical dryland agro-ecosystem, the following six treatments were established: (a) conventional tillage and residue removed (CT−R); (b) conventional tillage and residue retained (CT+R); (c) minimum tillage and residue removed (MT−R); (d) minimum tillage and residue retained (MT+R); (e) zero tillage and residue removed (ZT−R); and (f) zero tillage and residue retained (ZT+R). Minimum total net productivity (TNP) in both barley (the winter season crop) and rice (the rainy season crop) was recorded in the ZT−R treatment and the maximum in the MT+R treatment. In these crops, 83–88% of TNP was represented by above-ground net productivity (ANP). A reduction in tillage, from conventional to zero, especially when combined with residue retention, reduced the crop TNP/weed TNP ratio, reflecting the abundance of weeds with zero tillage. In both crops, minimum tillage increased grain yields, compared with conventional, but zero tillage resulted in reduced yields. Soil microbial biomass carbon (MBC) and nitrogen (MBN) and N-mineralization rates were higher in rice than in barley, and were maximum in the MT+R treatment. Crop productivity and grain yield in different treatments were positively correlated with MBC, MBN, N-mineralization rate and available-N. Strong negative correlations between crop productivity and grain yield with weed TNP and N-uptake were recorded. This study suggests that retention of a small fraction (one-third) of above-ground biomass from the previous crop and its incorporation in the soil through minimum tillage enhances the crop productivity and grain yield of succeeding crops and promotes soil fertility in a cereal based tropical dryland agro-ecosystem.