Improving water productivity is paramount for sustainable agriculture in arid regions. While rotational grazing is a common practice, its system-specific impacts on a suite of water productivity (WP) metrics, particularly irrigation water productivity (WPI), and its interplay with partial factor productivity of nitrogen (PFPN) remain poorly quantified. To investigate the effects of grazing on the resource use efficiency of grassland in inland arid region, we conducted a six-year grazing experiment on pastures featuring annual cereals (barley, wheat, rye) and a perennial alfalfa-tall fescue mixture, in the Hexi Corridor, Gansu Province, China. We demonstrated that rotational grazing consistently and significantly enhanced both WP and WPI, with relative increases ranging from 5.4% to 173.4% compared to hay harvesting in annual and perennial sown pastures. Concurrently, PFPN increased between 5.5% and 100.0%, with annual pastures showing greater year-to-year variability and perennial pastures demonstrating more consistent gains. More importantly, the pathways of grazing effects were system-dependent. In annual pastures, grazing enhanced resource capture by optimizing canopy architecture, whereas in perennial pastures, it primarily buffered climate stress to protect nitrogen utilization, a process closely linked to water use. Multivariate statistical modeling reveal that grazing fundamentally synchronized PFPN and WP, strengthening their coupling. Our findings highlight the rotational grazing as a key management strategy to co-enhance water and nitrogen productivity, providing a novel pathway to optimize agricultural water use in sown pastures of arid regions.