Considering straw resource utilization and air pollution prevention, straw return has been commonly practiced in China. However, the practicability of plenty straw return in an emerging maize–rice rotation and their effects on soil C and N pools have not been extensively investigated. This study has been conducted to examine the effects of straw return on soil nutrients, soil functional C and N fractions, and then to figure out their relationships with yield and N use efficiency. Two treatments of straw return (S2Nck) and without straw return (S0Nck) were compared in 3-year field experiment, and subplots without N application were added in their respective plots in the third year. The results showed that, relative to the control (S0Nck), straw return significantly increased soil mineralized nitrogen (Nmin), available P, and exchange K content by 11.7%, 41.1%, and 17.4% averaged across 3-year experiments, respectively. Straw return substantially increased soil dissolved organic C, microbial biomass C, and microbial biomass N content by 73.0%, 25.2%, and 36.8%, respectively. Furthermore, straw return markedly increased C and N retention in particulate organic matter in microaggregates (iPOM) and mineral associated organic matter within microaggregates (intra-SC), but significantly reduced in free mineral associated organic matter (free-SC) fraction. The structural equation modeling analysis showed that yield and the partial factor productivity of N were positively correlated with labile and slow soil C and N fractions. Consequently, straw incorporation significantly increased grain yields of maize by 14.7% and rice by 15.1%. The annual potential reduction proportion in fertilizer-N induced by straw return was estimated to be 25.7% in the third year. This study suggests that the incorporation of straws is an effective way to enhance soil nutrients and regulate soil C and N pools to improve crop production and has the potential to reduce N fertilizer application under maize–rice rotation in subtropical regions.