Nitrogen fertilization has been recognized as an essential tool towards the establishment of sustainable intensification of pasture-based livestock systems using tropical perennial grasses if, for a given ecosystem it is capable of increasing forage growth, stocking rates and animal performance. This study assessed pasture growth traits, nutritive value, animal and economic responses of Panicum maximum cv. Mombaça guinea grass pastures subjected to different levels of N fertilization (100 (N100), 200 (N200), and 300 (N300) kg N ha−1 yr−1). Pastures were managed under rotational stocking to maintain similar pre (80–90 cm) and post-grazing (45 cm) canopy heights. A partial budget and a Benefit–Cost Analysis were used to assess the economic returns on increasing N fertilization. N300 resulted in greater post-grazing herbage mass. A slightly higher neutral fiber and acid lignin detergent was observed at N100 (P < 0.05); crude protein increased linearly, and in vitro digestible organic matter reached maximum value at 265.4 kg N ha−1 yr−1. Annual averages of animal weight gain were 515, 590 and 660 g d−1, respectively, for N100, N200 and N300. There was a decrease from 3.7 to 1.9 kg of body weight gain per kg of additional N applied when increasing N rates from 100 to 200 and from 100 to 300 kg ha−1. The net profit improved with increasing N levels, but at reducing rates, reaching its maximum at the N300 level. The change from 100 to 200 kg N ha−1 presented the best return, with USD 3.73 for each additional dollar invested, while the change from 200 kg N ha−1 to 300 kg N ha−1 was economically less than optimal, recouping only USD 1.60 for each dollar. The N300 rate presented the highest net profit per hectare (accounting profit), even in a pessimist scenario (25% reduction in production). Despite being profitable, the N300 rate was less than optimal from an economic standpoint, since an additional 100 kg of Nitrogen ha−1 to change from N200 to N300 level reduced both the net returns and the Benefit–Cost ratio. Our results suggest that the economically optimal level of N fertilization for Mombaça guinea grass pasture should be between 200 and 300 kg ha−1.