Peanuts (Arachis hypogaea L.) are the world’s fourth-most important source of edible oil and the third-most valuable source of high-quality vegetable protein; they also contain carbohydrates, fatty acids, vitamins, and minerals essential for good human nutrition. Peanuts area particularly valuable crop in tropical and subtropical regions. While the demand for peanuts is increasing globally, there is a significant gap in nitrogen supply and demand in peanut production systems. To alleviate this, nitrogen fertilizers are often applied indiscriminately; this practice leads to the deterioration of indigenous soil fertility and to a long-term decline in crop productivity. Considering these aspects of soil health, a field study was conducted over two consecutive winter (November–March) seasons in 2015–2016 and 2016–2017 at the research farm of the agricultural university Bidhan Chandra Krishi Viswavidyalaya in West Bengal, India. This study examined supplementing different levels of nitrogen fertilizer with rhizobium and soil mulch in an irrigated peanut crop. The effects of these management interventions were evaluated in terms of crop productivity, nutrient dynamics, soil moisture, and the soil microbial activity. Peanuts grown with the 100% recommended dose of nitrogen, which was applied with rhizobium and grown under polythene mulching, recorded the highest average pod yield (3.87 and 3.96 t ha−1 in 2015–2016 and 2016–2017) and average kernel yield (2.88 and 2.99 t ha−1) in both growing seasons. This treatment also resulted in the greatest accumulation of nitrogen, phosphorous, and potassium by the peanut plants. In contrast, the maximum soil moisture distribution and the greatest total root zone moisture content were observed in the treatment with only rhizobium under the polythene mulch (i.e., no nitrogen was applied). The populations of soil bacteria and rhizobia were highest in the treatment where nitrogen fertilizer was applied to the crop at 75% of the recommended rate combined with rhizobium and under polythene mulch. After two cropping seasons, the peanut crop grown under polythene mulch with rhizobium and with nitrogen fertilizer applied at either the full recommended rate or 75% of this rate performed best in terms of crop productivity, soil nutrient dynamics, and soil moisture.