Irrigation is the main strategy deployed to improve vegetation establishment, but the effects of increasing water availability on N use strategies in desert shrub species have received little attention. Pot experiments with drought-tolerant shrub Calligonum caput-medusae supplied with water at five field capacities in the range of 30–85% were conducted using local soil at the southern margin of the Taklimakan Desert. We examined the changes in plant biomass, soil N status, and plant N traits, and addressed the relationships between them in four- and seven-month-old saplings and mature shrubs after 28 months. Results showed that the growth of C. caput-medusae was highly responsive to increased soil moisture supply, and strongly depleted the soil available inorganic N pools from 16.7 mg kg−1 to an average of 1.9 mg kg−1, although the total soil N pool increased in all treatments. Enhancement of biomass production by increasing water supply was closely linked to increasing total plant N pool, N use efficiency (NUE), N resorption efficiency (NRE), and proficiency (NRP) in four-month saplings, but that to total plant N pool, NRE, and NRP after 28 months. The well-watered plants had lower N concentrations in senesced branches compared to their counterparts experiencing the two lowest water inputs. The mature shrubs had higher NRE and NRP than saplings and the world mean levels, suggesting a higher N conservation. Structural equation models showed that NRE was largely controlled by senesced branch N concentrations, and indirectly affected by water supply, whereas NRP was mainly determined by water supply. Our results indicated that increasing water availability increased the total N uptake and N resorption from old branches to satisfy the N requirement of C. caput-medusae. The findings lay important groundwork for vegetation establishment in desert ecosystems.