Future climate scenarios suggest an increased frequency of summer drought periods in the European Alpine Region. Drought can affect soil nitrogen (N) cycling, by altering N transformation rates, as well as the abundances of ammonia-oxidizing bacteria and archaea. However, the extent to which drought affects N cycling under in situ conditions is still controversial. The goal of this study was to analyse effects of drought on soil N turnover and ammonia-oxidizer abundances in soil without drought history. To this end we conducted rain-exclusion experiments at two differently managed mountain grassland sites, an annually mown and occasionally fertilized meadow and an abandoned grassland. Soils were sampled before, during and after drought and were analysed for potential gross rates of N mineralization, microbial uptake of inorganic N, nitrification, and the abundances of bacterial and archaeal ammonia-oxidizers based on gene copy numbers of the amoA gene (AOB and AOA, respectively). Drought induced different responses at the two studied sites. At the managed meadow drought increased NH4+ immobilization rates and NH4+ concentrations in the soil water solution, but led to a reduction of AOA abundance compared to controls. At the abandoned site gross nitrification and NO3− immobilization rates decreased during drought, while AOB and AOA abundances remained stable. Rewetting had only minor, short-term effects on the parameters that had been affected by drought. Seven weeks after the end of drought no differences to control plots could be detected. Thus, our findings demonstrated that in mountain grasslands drought had distinct transient effects on soil nitrogen cycling and ammonia-oxidizers, which could have been related to a niche differentiation of AOB and AOA with increasing NH4+ levels. However, the effect strength of drought was modulated by grassland management.