Precipitation fluctuations with high nitrogen (N) deposition severely impact terrestrial ecosystem functioning, particularly in arid areas. Here, with rainout shelter facility, a field experiment with a large variation in precipitation and N addition was conducted to disentangle the responses of the plant community to normal precipitation, less precipitation, and rewetting conditions in a desert steppe, Inner Mongolia, northern China. The field experiment established a unique annual precipitation change cycle across normal precipitation, less precipitation, and rewetting processes to quantify drought resistance, recovery and resilience by calculating functional differences among three years. Furthermore, the relationships between plant community functional traits and response indices (i.e., the resistance, recovery, and resilience) were tested to clarify the mechanisms driving their responses to precipitation regimes and N addition. The aboveground net primary production (ANPP) increased with annual precipitation and was enhanced by N addition. ANPP with reduced precipitation regimes was less resistant to drought but recovered significantly greater than that with increased precipitation regimes. The perennial species, C₃ plants, and forbs mainly contributed to the variations in vegetation productivity in response to drought and wet status cycles. Drought resistance and the recovery of species’ functional diversity, evenness, and ANPP stability were closely associated with precipitation changes. The present findings suggested that altered precipitation patterns, community composition, and functional stability contribute to ecosystem stability during water change cycles and are mediated slightly by N deposition. These findings advance understanding of the mechanisms of ecosystem functioning underlying the responses to climatic change.