This paper identifies optimal combinations of nitrogen in the form of urea, fresh litter and composted litter for rice production. Traditional cost minimization techniques using data from experimental results conducted at three sites in Arkansas during 1991 have been employed. Comparisons between different scenarios indicate that the trade-off between the use of poultry litter and urea nitrogen depends on such factors as soil fertility, the yield response to litter application and the relative prices of nitrogen and litter. The use of litter is more economical at high target yields than at low target yields.