Crop residues under different water regimes can cause significant alterations in soil organic carbon fractions, and in turn, soil-atmospheric CO2 emissions. To evaluate the effect of rice straw application on CO2 emissions and labile organic carbon fractions under different water regimes, an incubation experiment was conducted for 90 days. Ten treatments were developed from the interaction between five water levels (100, 85, 70, 55 and 40% of water holding capacity (WHC)) with and without incorporation of rice straw. Peaks of CO2 fluxes were observed after 13 days of rice incorporation, which decreased gradually till the end of the incubation period. The incorporation of rice straw caused significant increases in CO2 fluxes by 2.77-2.83 times from the paddy soil. In the presence of rice straw, the highest CO2 fluxes were generally observed at W3 (70% of WHC), whereas the lowest fluxes were occurred at W1 (100% of WHC). Addition of rice straw under a range of water regimes markedly improved the transformation of soil organic carbon and labile organic carbon pools such as dissolved organic carbon, microbial biomass carbon, light fraction organic carbon, particulate organic carbon and permanganate oxidizable carbon. The significant correlations between all labile soil organic carbon fractions and CO2 concentrations confirmed their important roles in the emission of CO2 from the paddy soil. In summary, the results suggest that light fraction organic carbon, particulate organic carbon and permanganate oxidizable carbon were more sensitive indicators for CO2 emissions and organic matter alterations as compared to other carbon fractions.