Kayu putih (Melaleuca cajuputi) waste has the potential via in situ biochar briquettes to overcome the low availability of nitrogen in soil. This study evaluated the short-term effects of in situ biochar briquettes on nitrogen loss reduction and determined an optimum scenario for hybrid rice grown in an agroforestry system among kayu putih stands. This three-year experiment (2019–2021) was conducted using a randomised complete block design factorial with three blocks as replications. The treatments included biochar briquettes made from kayu putih waste (0-, 2-, 4-, and 6-grain plant−1 or 0, 5, 10, and 15 tonnes ha−1) and urea fertiliser (0, 100, 200, and 300 kg ha−1). The results demonstrated that the eco–environmental scenario was the most efficient strategy that improved the soil quality, the physiological characteristics, and the yield of the hybrid rice with the optimum application of the biochar briquettes at 5.54-grain plant−1 and the urea fertiliser at 230.08 kg ha−1. This alternative approach illustrated a reduction in both the usage of urea fertiliser and the loss of nitrogen by 23.31% and 26.28%, respectively, while increasing the yield of the hybrid rice by 24.73%, as compared to a single application of 300 kg urea ha−1 without biochar briquettes.