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. To this end we conducted a rain-exclusion experiment 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 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). Our results showed that the response to drought differed between the two sites. Effects were stronger at the managed meadow, where NH4+ immobilization rates increased and AOA abundances decreased. At the abandoned site gross nitrification and NO3− immobilization rates decreased during drought, while neither AOB, nor AOA abundances were affected. The different responses of the two sites to drought were likely related to site specific differences, such as soil organic matter content, nitrogen pools and absolute soil water content, resulting from differences in land-management. At both sites rewetting after drought had only minor short-term effects on the parameters that had been affected by drought, and seven weeks after the drought no effects of drought were detectable anymore. Thus, our findings indicate that drought can have distinct transient effects on soil nitrogen cycling and ammonia-oxidizer abundances in mountain grasslands and that the effect strength could be modulated by grassland management.