||Intronic regions of eukaryotic genomes accumulate a large number of Transposable Elements (TEs). Although TE-bearing introns are widely observed among eukaryotic genomes, their epigenetic states, impacts on gene regulation and function, and their contributions to genetic diversity and evolution, are yet to be fully understood. In this study, we investigated the genome-wide distribution of intronic TEs and their epigenetic states in the Oryza sativa genome. We found that over 10% of the rice genes contain intronic heterochromatin, most of which are associated with TEs and repetitive sequences. These heterochromatic introns are longer and highly enriched in promoter-proximal positions. The genes with heterochromatic intron tend to show tissue-specific expression pattern, and are also implicated in basal functions in developmental processes as well as in responses to environmental stimuli. Furthermore, we found that heterochromatic introns evolve rapidly compared to non-heterochromatic introns. Our study highlights regulatory roles of intronic heterochromatin on gene transcription and its impacts on diversification of genome sequence and gene functions in plants.