Drought can increase nitrogen (N) loss due to enhanced asynchronicity between N release through mineralization and plant N uptake. Organic amendments of N could potentially mitigate this loss where the N is more slowly released and made available at times when plants need it. Drought (ambient vs. reduced precipitation implemented with rainout shelters) and fertilizer addition (compost vs. mineral fertilizer) were used to examine the changes in mineralization, plant uptake and loss of N during dry and wet periods in a grassland of Australia. Both gross N mineralization (GNM) and plant N uptake were high in wet summers and low in dry summers, while in the winter the relatively high GNM was not matched with similarly high plant N uptake. Drought conditions combined with mineral fertilizer addition resulted in the highest plant δ¹⁵N values, reflecting a more open N cycle (high N loss). In contrast, under drought conditions, compost released N more slowly and showed greater synchronicity with plant N demand. Because drought has become increasingly more intense and frequent, compost addition to grasslands could be a beneficial management strategy to improve soil health and increase plant productivity, and most importantly, to reduce N loss compared to mineral fertilizers.