Soil water scarcity hinders crop productivity globally, emphasizing the imperative for sustainable agriculture. This study investigated the role of nitrogen in alleviating drought stress in barley. Parameters such as relative water content, photosynthetic rate, stomatal conductance, mesophyll concentration of CO2, total leaf nitrogen, grain yield, total organic nitrogen content, starch content, and macronutrient concentrations (N, P, K, Ca, Mg) were examined. The optimal grain yield (3.73 t·ha−1) was achieved with 1 g of nitrogen per container (near 200 kg N hectare−1) under ideal moisture conditions. However, under drought stress, nitrogen supply variants (1 g and 2 g per container) exhibited a significant decrease in photosynthetic rate (Pn), NRA activities, and a notable increase in Ci values. Stomatal conductance exhibited a substantial decrease by 84% in the early growth phase, especially with a 2 g dose of nitrogen supply. Nitrogen enhanced crude protein levels, yet both drought stress and nitrogen application reduced grain weight and starch content. Nitrogen effectively improved metabolic processes under drought, particularly in earlier growth stages (e.g., tillering). This research highlights the importance of sustainable agricultural practices related to the growth stage of barley, emphasizing nitrogen optimization to enhance crop resilience in water-scarce environments. The results underscore the intricate interplay between nitrogen fertilization, drought stress, and crop yield, indicating benefits during initial stress exposure but detrimental effects in subsequent growth stages.