Soil erosion exerts a profound impact on nitrogen cycling and vegetation restoration in fragile ecosystems, yet the mechanisms underlying the influence of erosion intensity on soil nitrogen transformation during the initial stages of revegetation remain poorly understood. To simulate a natural erosion gradient in the dry-hot valleys of Southwest China, we constructed vegetation restoration plots and conducted soil erosion experiments by removing topsoil to depths of 0, 10, 20, 30, and 40 centimeters. Results demonstrated that in the dry-hot valley of Southwest China, soil total nitrogen (TN), ammonium nitrogen (NH4+-N), nitrate nitrogen (NO3- -N), and soil organic carbon (SOC) decreased significantly (p < 0.05) with increasing erosion intensity. In the severe erosion group (30-40 cm), the gross rates of mineralization (GM) and nitrification (GN) declined by 30-60%, while microbial immobilization of NH4+ and NO3- remained relatively stable. Structural equation modeling revealed distinct seasonal drivers: available nitrogen was primarily influenced by TN, SOC, and dissolved organic carbon (DOC), during the rainy season, and they were regulated by the soil microenvironment, functional microorganisms (ammonia-oxidizing archaea (AOA) and bacteria (AOB)), and nitrogen transformation processes in the dry season. Although AOA abundance consistently exceeded that of AOB, both declined with erosion, indicating AOA's adaptability to acidic soils. The nonlinear decline in nitrogen turnover rates suggests a potential erosion threshold that may impair soil recovery. Our findings show that nitrogen loss induced by soil erosion suppresses early vegetation recovery indicating nitrogen limitation. We propose targeted management strategies to mitigate nitrogen limitation: enhancing soil carbon and nitrogen inputs during the rainy season, and optimizing microbial habitats by improving soil structure in the dry season. This study provides critical insights for restoring degraded ecosystems in erosion-prone arid regions.