Water scarcity hampered rice production and jeopardized worldwide food security. Under conditions of water scarcity, this research investigates the effect of four different Allium peels on soil water holding capacity (WHC) and rice seedlings development. Physicochemical analysis of red, yellow onions, and garlic peels was performed, and their application for growing rice in soil irrigated with 50% field capacity compared to the well-irrigated control group was achieved. Garlic peels contained the least sulphur (0.007 g/g), while red onion peels contained the most (0.147 g/g). The contents of crude fiber, ash, carbohydrates, proteins, phenolic, and flavonoids varied between species. The application of garlic peel to soil resulted in a 60% increase in the soil WHC, which was directly proportional to the fiber content of each peel. Rice seedlings cultivated in pots supplemented with different peels, especially the garlic peel, exhibited substantial growth when subjected to restricted water regimes. Rice plant pigment fractions and hydration status were drastically reduced due to water constraints; however, the addition of garlic and onion peels supplements mitigated this effect. Most especially, supplementing soil with garlic peels caused an enhancement of 66.7% and 80.22% in length and fresh weight of shoot, 59.9% and 87.3% in chlorophyll a and b. The carotenoids, water content, proline, protein, enzymatic antioxidants, and non-protein thiols were all increased by these peels, while rice leaf oxidative impairment (lipooxygenase, lipid peroxidation, and H2O2) was decreased. ISSR analysis detects a positive correlation between genomic profiles of plants cultivated in different peel-amended soils. Agro-waste may support soil management, promote rice growth in conditions of limited irrigation water, and provide solutions for water scarcity and waste management. Water conservation and sustainable agriculture are made possible by this novel method.