Rice seedling wilt frequently occurs in upland nurseries under well-aerated conditions and causes considerable economic loss. Whether the wilt is pathogenic or edaphic is not known. We hypothesize the use of composts to alleviate seedling wilt. The severity level of upland rice seedling wilt was significantly (p < 0.05) positively correlated with soil pH (r = 0.499; n = 19), but negatively correlated with soil organic matter (r = −0.745), microbial biomass C (r = −0.669), activities of dehydrogenase (r = −0.589), arylsulfatase (r = −0.272), fluorescein diacetate hydrolysis (r = −0.466), and β-glucosidase (r = −0.280). Correlations between severity level and soil inorganic N and exchangeable potassium K were not significant. Contents of Fe, Zn, Cu, and Mn in healthy seedlings were not significantly (p < 0.05) different from those in infected seedlings. These data suggest that seedling wilts are not associated with nutrient constraints. Compost amendment at the rate of 3% or above in pot experiments significantly improved seedling growth and reduced the wilt symptoms. Field trials further showed that aboveground weight of seedlings in compost-amended treatment ranged from 11.5 to 14.9 mg per plant, significantly higher than the range from 6.38 to 12.1 mg per plant in the control treatment; in addition to rice growth compost significantly increased microbial biomass and enzyme activities of soils. Soil fumigation significantly increased rice growth and alleviation symptoms in 11 out of 19 soils, suggesting the involvement of pathogens. It is concluded that upland seedling wilt is a pathogen-associated disease. Probably high soil pH and low soil biochemical activities may favor pathogen activities.