Fly ash is an inevitable by-product from the coal-fired power plants in many developing countries including India that needs safe, timely and productive disposal. The addition of fly ash alters physicochemical properties of soil and hence could be used as a soil conditioner or modifier along with the appropriate level of vermicompost to support plant growth. Several studies have focalized sole use of fly ash and vermicompost in agricultural production systems lacking information on combined application effects. This work was carried out at Chiplima in the district of Sambalpur, Odisha, India, to ascertain the best suited combination of native soil, fly ash and vermicompost (from farmyard manure) for rice nursery based on the changing physicochemical properties and seedling growth. The experiment consisting of 21 treatment combinations of soil, fly ash and vermicompost at 0%, 20%, 40%, 60%, 80% and 100% by weight was laid out in a factorial complete randomized design with three replications. Fly ash and vermicompost at moderate concentrations significantly ameliorated the physical properties, viz., porosity, bulk and particle densities, water holding capacity, infiltration rate and the capillary rise of water in rice nursery soil that ultimately resulted in vigorous rice seedlings at 40 DAS through beneficial soil biota as well as better root and shoot development. The porosity, water holding capacity and infiltration rate significantly increased with the addition of vermicompost while fly ash addition substantially reduced them. Fly ash and vermicompost in moderate quantities smothered soil chemical properties like electrical conductivity and organic carbon that increased the availability of N, P, K, B, S and Zn. The pH did not differ significantly due to treatment effects owing to a marginal difference in pH of the substrates, whereas electrical conductivity increased significantly with only marginal addition of fly ash to vermicompost. Considering the economic feasibility and environmental impacts, 40% soil + 20% fly ash + 40% vermicompost may be recommend to the farmers for wet rice nursery raising and also for remediating the coal fly ash in agricultural production system.