Arid regions are prone to drought because annual rainfall accumulation depends on a few rainfall events. Natural plant communities are damaged by drought, but atmospheric nitrogen (N) deposition may enhance the recovery of plant productivity after drought. Here, we investigated the effect of increasing N deposition on post-drought recovery of grassland productivity in the Mongolian steppe, and we examined the influence of grazing in this recovery. We added different amounts of N to a Mongolian grassland during two sequential drought years (2006 and 2007) and the subsequent 3 years of normal rainfall (2008-2010) under grazed and nongrazed conditions. Aboveground biomass and number of shoots were surveyed annually for each species. Nitrogen addition increased grassland productivity after drought irrespective of the grazing regime. The increase in grassland productivity was associated with an increase in the size of an annual, Salsola collina, under grazed conditions, and with an increase in shoot emergence of a perennial, Artemisia adamsii, under nongrazed conditions. The addition of low N content simulating N deposition around the study area by the year 2050 did not significantly increase grassland productivity. Our results suggest that increasing N deposition can enhance grassland recovery after a drought even in arid environments, such as the Mongolian steppe. This enhancement may be accompanied by a loss of grassland quality caused by an increase in the unpalatable species A. adamsii and largely depends on future human activities and the consequent deposition of N in Mongolia.