The recent increase in global consumption of rice has led to increased demand for sustainable water management in paddy cultivation. In this study, we propose an enhanced paddy simulation module to be introduced to Soil and Water Assessment Tool (SWAT) to evaluate the sustainability of paddy cultivation. The enhancements added to SWAT include: (1) modification of water balance calculation for impounded fields, (2) addition of an irrigation management option for paddy fields that are characterized by flood irrigation with target water depth, and (3) addition of a puddling operation that influences the water quality and infiltration rate of the top soil layer. In a case study, the enhanced model, entitled SWAT-Paddy, was applied to an agricultural watershed in Japan. The results showed that the SWAT-Paddy successfully represented paddy cultivation, water management, and discharge processes. Simulated daily discharge rates with SWAT-Paddy (R2 = 0.8) were superior to the SWAT result (R2 = 0.002). SWAT-Paddy allows the simulation of paddy management processes realistically, and thus can enhance model accuracy in paddy-dominant agricultural watersheds.