Left-over crop residue on the surface is a measure of tillage intensity and soil management, and is an integral part of the conservation agriculture practice. Remote sensing can be successfully used to monitor the large area crop residue cover which is otherwise difficult through the conventional way, provided the spectrally similar crop residues and soil can be suitably differentiated. Hyperspectral reflectance (350–2500 nm) of various quantities of crop residue cover over red soil was measured with varying moisture contents in the residue. A broad spectrum near 2100 mm was identified for dry residue, which was not recorded in soil spectra. This could possibly be linked to the cellulose-lignin content. The cellulose absorption index (CAI) was evaluated for crop residue cover with moderate to good correlations, with strong dependency on the residue water content. A few narrow bands were identified to characterize both the cellulose-lignin (i.e. the CAI) and the water content, and could be incorporated in on-board multispectral sensors for regional estimation of crop residue over the soil surface.