A considerable amount of evidence has shown that intercropping enhances biodiversity, which in turn suppresses pests and diseases. However, few works have been done on exploring the possibility of intercropping rice with other crops in wetlands to reduce pest/insect damage via diversified agro-ecosystem. In this study, a field experiment was conducted to look into the effect of rice and arrowhead (Sagittaria sagittifolia) intercropping on pest/disease occurrence without the use of agrochemicals and to evaluate yield performance by examining the effects of the intercropping on the microenvironment and photosynthetic gas exchange of rice leaf. Results showed that the rice/arrowhead intercropping did not effectively suppress the population growth of rice hopper and Cnaphalocrocis medinalis. However, the intercropping system significantly reduced the occurrence of rice blast and sheath blight diseases. Compared with monocropping system, the intercropping system significantly reduced the occurrence of rice blast at elongation and heading stages by 64.29% and 88.24%, respectively. Diseased hill rate of rice sheath blight at filling and milk-ripening stages also were reduced under intercropping. Normally, CAT, POD and SOD activities increase when crops are subjected to pathogenic attack. However, in this study, CAT, POD and SOD activities were lower under intercropping than under monocropping treatments at filling and milk-ripening stages. Elevated enzyme activity under monocropping was positively related with rice defense against higher disease incidence. Analyses of micro-environmental factors showed that intercropping decreased air humidity on rice leaf surface in morning and noon periods. Meanwhile, leaf absorbed photosynthetically active radiation was higher under intercropping system for most of the daytime. The modified micro-environment benefited the depression of breeding and spread of pathogens in paddy fields. Net photosynthetic rate, transpiration rate and stomatal conductance of rice leaf were higher under intercropping system than monoculture system during most of the daytime. This suggested that intercropping improved light utilization rate and photosynthetic efficiency of rice. In the study, the land equivalent ratio of the intercropping system was 1.17. This also suggested that rice/arrowhead intercropping not only effectively reduced the occurrence of rice disease, but also produced higher crop yields and greater land use efficiency.