It has widely been documented that nitrogen (N) enrichment stimulates plant growth and net primary production. However, there is still dispute on how N addition affects net ecosystem CO2 exchange (NEE), which represents the balance between ecosystem carbon (C) uptake and release. We conducted an experimental study to examine effects of N addition on NEE in a temperate steppe in northern China from 2005 to 2008. N was added at a rate of 10 g N m(-2) yr(-1) with NH4NO3 alone or in combination with phosphorous (P, 5 g P2O5 m(-2) yr(-1)) in both clipped and unclipped plots. Over the 4 years, N addition significantly stimulated growing-season NEE, on average, by 27%. Neither the main effects of P addition or clipping nor their interactions with N addition were statistically significant on NEE in any of the 4 years. However, the magnitude of N stimulation on NEE declined over time. N addition significantly increased NEE by 60% in 2005 and 21% in 2006, but its effect was not significant in 2007 and 2008. N-induced shift in species composition was primarily responsible for the declined N stimulation over time. The gradually increasing coverage of the upper canopy species (Stipa krylovii) and standing litter accumulation induced light limitation on the lower canopy species (Artemisia frigida). Thus, N-induced shifts in plant species composition strongly regulated the direct effects of N addition on C sequestration in the temperate steppe.