A feasibility study of paddy drying by fluidization technique was conducted. Operating parameters affecting product quality, drying capacity and energy consumption were investigated. Experimental results showed that drying rate of a paddy kernel was controlled by diffusion. However, drying capacity of a dryer increased with specific air flow rates and drying air temperatures. Energy consumption was reduced when specific air flow rate decreased or when fraction of recycled air increased. Maximum temperature should be limited to 115%C and final moisture content of paddy at 24-25% dry basis if product qualities were maintained. Simulated results obtained from a developed mathematical model indicated that the optimum operating parameters should be as follows : fraction of air recycled of 80%, air velocity of 4.4 m/s, bed thickness of 9.5 cm and specific air flow rate of 0.1 kg/s-kg dry matter. An economic analysis showed that total drying cost was US$ 0.08/kg water evaporated.