Dwarf bamboo (Fargesia denudata) is a crucial food source for the giant pandas. With its shallow root system and rapid growth, dwarf bamboo is highly sensitive to drought stress and nitrogen deposition, both major concerns of global climate change affecting plant growth and rhizosphere environments. However, few reports address the response mechanisms of the dwarf bamboo rhizosphere environment to these two factors. Therefore, this study investigated the effects of drought stress and nitrogen deposition on the physicochemical properties and microbial community composition of the arrow bamboo rhizosphere soil, using metagenomic sequencing to analyze functional genes involved in carbon and nitrogen cycles. Both drought stress and nitrogen deposition significantly altered the soil nutrient content, but their combination had no significant impact on these indicators. Nitrogen deposition increased the relative abundance of the microbial functional gene nrfA, while decreasing the abundances of nirK, nosZ, norB, and nifH. Drought stress inhibited the functional genes of key microbial enzymes involved in starch and sucrose metabolism, but promoted those involved in galactose metabolism, inositol phosphate metabolism, and hemicellulose degradation. NO3−-N showed the highest correlation with N-cycling functional genes (p < 0.01). Total C and total N had the greatest impact on the relative abundance of key enzyme functional genes involved in carbon degradation. This research provides theoretical and technical references for the sustainable management and conservation of dwarf bamboo forests in giant panda habitats under global climate change.