Although the effects of N deposition on forest plants have been widely reported, few studies have focused on rare and endangered fern species (REFs). Information is also lacking on the effects of micro-environments on REFs. We investigated the effects of N addition (canopy and understory N addition, CAN, and UAN) and micro-environments (soil and canopy conditions) on the functional traits (growth, defense, and reproduction; 19 traits in total) of two REFs—Alsophila podophylla and Cibotium baromet—in a subtropical forest in South China. We found that, compared to controls, CAN or UAN decreased the growth traits (e.g., plant height, H) of C. baromet, increased its defense traits (e.g., leaf organic acid concentrations, OA), delayed its reproductive event (all-spore release date), and prolonged its reproductive duration. In contrast, A. podophylla showed increased growth traits (e.g., H), decreased defense traits (e.g., OA), and advanced reproductive events (e.g., the all-spore emergence date) under CAN or UAN. Meanwhile, the negative effects on the C. baromet growth traits and A. podophylla defense traits were stronger for CAN than for UAN. In addition, the soil chemical properties always explained more of the variations in the growth and reproductive traits of the two REFs than the N addition. Our study indicates that, under simulated N deposition, C. baromet increases its investment in defense, whereas A. podophylla increases its investment in growth and reproduction; this may cause an increasing A. podophylla population and decreasing C. baromet population in subtropical forests. Our study also highlights the importance of considering micro-environments and the N-addition approach when predicting N deposition impact on subtropical forest REFs.