Straw incorporation poses a persistent challenge while remaining fundamental to soil fertility management in modern Chinese agriculture. However, traditional straw incorporation methods are characterized by slow decomposition, inefficient soil organic matter enhancement, and significant yield reduction. To combat these drawbacks, we proposed and developed straw pelletization technology as a novel alternative for efficient straw utilization over 14 years, providing a novel solution for land conservation and intensive utilization. This review synthesized the research progress in straw pelletization and incorporation, with the aim of providing a theoretical foundation and technical guidance for its high-quality development. This review commenced with a retrospective analysis of the conceptual foundation of straw pelletization and incorporation, which involves secondary crushing and pelletizing of straw to simultaneously tackle decomposition and field incorporation challenges. Subsequently, based on previous practices, the study delineated ten major advantages, such as markedly increased incorporation rates, rapid soil organic carbon sequestration, and stable yield improvements. It also identifies three salient scientific questions, the mechanism of accelerated decomposition, carbon turnover processes, and carbon sequestration thresholds, while envisioning the application potential of pelletized straw returning in intensive agriculture, organic agriculture, medium- and low-yield fields, and reserve croplands. Finally, to bridge the gap in large-scale and widespread adoption, two essential supporting measures were proposed: the optimization and widespread deployment of integrated straw crushing and pelletizing machinery, and the establishment and development of a straw pellet trading platform. In summary, straw pelletization and incorporation enable the simultaneous improvement of soil fertility and crop yield, thereby supporting the national strategies of the Two Stores (storing grain in the land and through technology) and the Dual Carbon (Carbon Peak and Carbon Neutrality).