Abstract: Rice field ecosystems have dual functions as C sources and C sinks. Soil C sequestration plays an important role in improving the productivity of rice fields, and greenhouse gas emissions from rice fields exacerbate the risk of global warming. Therefore, regulating the C sequestration and emission reduction of paddy soil is of great significance for ensuring food security in China and achieving the goal of “carbon neutrality”. In recent years, researches have focused on the processes and mechanisms of soil organic C (SOC) turnover in paddy fields worldwide. This review summarized the processes and mechanisms of soil C sequestration in paddy fields from the perspectives of sources, transformation, stabilization, and regulation techniques of SOC, and proposed strategies to deal with “carbon neutrality”. SOC is mainly derived from plants and microorganisms. The input of rice rhizosphere C accounted for approximately 28% of the entire underground C input during a single season, and the contribution rates of rice rhizosphere C and microbial assimilated C to the accumulation of SOC were 71.9% and 55.5%, respectively, which were much higher than that of rice straw (12.1%) and the root system (19.8%). After the input of exogenous organic materials into the soil, the decomposition and mineralization of organic materials were first controlled by the dissolution process of SOC, which was the rate-limiting step. The microbial mineralization of the dissolved SOC was affected by the soil moisture conditions, nutrients contents, stoichiometric ratio, microbial activity, and other factors. Apart from the emitted SOC, the remaining inputs were mainly anabolized to form living microorganisms and microbial residues, which were finally fixed in the soil protected by aggregates, organo-mineral colloidal complexes, and necromass (amino sugars). Based on the estimation of assimilation and emission of carbon dioxide, the annual net C sequestration of paddy ecosystems was approximately 156.4 Tg C in China, which proved that paddy soil had a significant C sequestration effect. Although straw removal or incineration, positive priming effects, and other factors decreased the amount of C sequestered in paddy soil, research data had shown that the SOC content of subtropical paddy soil had increased by 60% under the implementation of multiple management strategies such as irrigation and fertilizer application and straw returning in the last 40 years. It had a positive effect on achieving “carbon neutrality” by adopting the management of increasing C sequestration and mitigating greenhouse gas emissions. These management strategies included optimizing the combination of irrigation and fertilizer application and straw returning, establishing an ecological compensation mechanism for C emission reduction, and promoting the inclusion of the rice farming system in the “C trading market”. Therefore, it is necessary to clarify the mechanism of C sequestration in paddy fields, improve the accuracy of estimating and forecasting C neutrality, and accelerate the development of C neutralization technology in paddy fields in future research, which will provide scientific and technological support for achieving the “carbon neutrality” strategic goal in advance.