Nitrogen (N) losses can be substantial in furrow-irrigated onions (Allium cepa L.). Polymer-coated urea (PU) may reduce N losses and result in an increase in productivity. In this study, we investigated the effects of different rates and blends of urea and PU on onion yield and N use for two cropping seasons. Nitrogen was applied at 112, 168, and 224 kg·ha-1 as PU or urea. In addition, three PU/urea blends equal to 224 kg·ha-1 of N were compared. Plant growth and N concentration, soil nitrate concentrations, and bulb yield were evaluated each year. Onion yield decreased by 95 Mg·ha-1 for each 25% increase in the proportion of urea in the fertilizer blends. Reducing the N rates from 224 to 112 kg·ha-1 had minimal effect on bulb yield when all the fertilizer was supplied by urea. A reduction of N applied from 224 to 168 kg·ha-1 had little effect on yield, although a further reduction to 112 kg·ha-1 did significantly reduce bulb yield when the entire N was supplied from PU. Nitrogen source and rate had no effect on bulb maturity and only minor effects on leaf area and storage potential. Soil sampling indicated that more N was retained in PU-treated onion beds than in urea-treated beds, which improved nitrogen use efficiency. In addition, N use efficiency improved when there was more PU in the blend and when PU was compared with urea at the same rate. We conclude that the use of PU can dramatically improve N use efficiency and productivity in direct-seeded onions.