Nitric oxide (NO) is an important trace gas and regulator of atmospheric photochemistry. Theory suggests moist soils optimize NO emissions, whereas wet or dry soils constrain them. In drylands, however, NO emissions can be greatest in dry soils and when dry soils are rewet. To understand how aridity and vegetation interact to generate this pattern, we measured NO fluxes in a California grassland, where we manipulated vegetation cover and the length of the dry season and measured [δ(15)-N]NO and [δ(18)-O]NO following rewetting with (15)N-labeled substrates. Plant N uptake reduced NO emissions by limiting N availability. In the absence of plants, soil N pools increased and NO emissions more than doubled. In dry soils, NO-producing substrates concentrated in hydrologically disconnected microsites. Upon rewetting, these concentrated N pools underwent rapid abiotic reaction, producing large NO pulses. Biological processes did not substantially contribute to the initial NO pulse but governed NO emissions within 24 h postwetting. Plants acted as an N sink, limiting NO emissions under optimal soil moisture. When soils were dry, however, the shutdown in plant N uptake, along with the activation of chemical mechanisms and the resuscitation of soil microbial processes upon rewetting, governed N loss. Aridity and vegetation interact to maintain a leaky N cycle during periods when plant N uptake is low, and hydrologically disconnected soils favor both microbial and abiotic NO-producing mechanisms. Under increasing rates of atmospheric N deposition and intensifying droughts, NO gas evasion may become an increasingly important pathway for ecosystem N loss in drylands.