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Nitrogenous (N) fertilizers are widely applied in agriculture for improving crop yield. However, significant quantity of chemically-applied N is lost leading to low nitrogen use efficiency (NUE). Therefore, two laboratory incubation studies were designed to evaluate the effects of different coating agents [no coating, neem ( Azadrichta indica ) oil coating and potassium ammonium phosphate (PAP) coating) on urea hydrolysis and nitrification under varying temperatures (25, 35 and 40 °C) and moisture regimes (30, 60 and 90% of field capacity). Results revealed that the NH 4 + and NO 3 − concentrations increased both with temperature and moisture levels. Using the organic-coated neem oil coated urea (NOCU) significantly reduced the release of NH 4 + and NO 3 − . Thereafter, a field experiment was conducted to explore the best coating agent [N 0 , 100% conventional urea, 75, 50 and 25% of recommended neem oil coated urea (NOCU)] using irrigated (Akbar-2019) and rainfed (Barani-2017) wheat cultivars. Even the reduced rates (50%) of the recommended NOCU performed at par to 100% recommended uncoated urea fertilizers. Application of 1% NOCU @ 75% of the recommended urea resulted in maximum grain yield (3.65 Mg ha − 1 ), N in roots (0.87%), N in straw (0.85%) and N in grains (1.07%) in irrigated wheat variety (Akbar-2019). Thus, using 1% neem oil coated urea @ 75% of the recommended uncoated urea has the potential to enhance the growth, yield, N uptake and NUE in wheat effectively under both rain fed and irrigated conditions.