Productivity of semiarid grasslands is primarily limited by seasonal rainfall amount and becomes increasingly limited by nutrient availability under wet conditions. Interactive effects of water and N availability on grassland productivity and parameters related to water use were studied on a grassland site in Inner Mongolia, China, in a 2-factorial experiment with two levels of water (rainfed: 158 mm; irrigated: 839 (N0) and 972 (N1) mm) and N supply (0 or 180 kg N ha −1 ). RUE was calculated from ANPP and cumulative water supply. Bare soil evaporation (E) was calculated from climatic data and leaf area dynamics, and percolation (D) and transpiration (T) were estimated with HYDRUS-1D. Water-use efficiency (WUE, ANPP / (T + D)) and transpiration efficiency (TE, ANPP / T) were calculated. Resource availability had pronounced effects on the water-use efficiency of semiarid grassland. RUE, WUE, and TE all decreased under irrigated compared to rainfed conditions and were significantly increased with N fertilizer application at both levels of water supply. While the irrigation effect on parameters of water-use efficiency were accordingly reflected in stable carbon isotope signatures, N supply resulted in significantly less negative δ 13 C-values under rainfed but not irrigated conditions. It is concluded, that spatial or temporal gradients in resource availability have pronounced effects on the water-use efficiency of semiarid grassland. The decrease of water use-efficiency under high water supply was related to differences in TE and not to a relative increase of unproductive water loss. Carbon isotope discrimination was highly correlated with WUE and TE, but can be a poor predictor of RUE.