A coated nitrogen fertilizer with slow release and water retention (CNSW) was prepared by cross-linked poly(acrylic acid)/organo-attapulgite (outer coating), urea-formaldehyde (UF) (inner coating), and urea granule ( core). The synthesis conditions of inversion suspension polymerization were studied systematically. The water absorbency of CNSW was 80 times its own weight in tap water. Elemental analysis showed that the nitrogen content of the product was 28.3%. Swelling rate, slow release, and water retention properties of CNSW were also investigated, and a possible slow release mechanism was proposed. The results showed that the product had a high initial swelling rate, and the product had not only a good slow release property but also excellent water retention capacity, which could effectively improve the utilization of fertilizer and water resource. The results of the present work indicated that CNSW would find good application in agriculture and horticulture, especially in drought-prone areas.