Drylands are water-limited systems that collectively sustain hundreds of millions of people, yet land-atmosphere feedbacks such as terrestrial moisture recycling remain poorly quantified. In particular, the origins of precipitation in China's drylands and their atmospheric water vapor budgets remain unclear. Here we use a Lagrangian moisture-tracking model to quantify atmospheric moisture sources and budgets for precipitation across China's drylands from 2001 to 2020. We find that local moisture recycling dominates drylands precipitation, with most precipitation originating from evapotranspiration within the drylands themselves. Vegetation transpiration constitutes the primary recycled component, accounting for more than half of atmospheric moisture supply in most source regions. About 80% of precipitation sources occurred during the growing season. At the provincial scale, Shannxi (261 mm yr(-1)), Xizang (260 mm yr(-1)), Qinghai (235 mm yr(-1)), Shanxi (225 mm yr(-1)), Sichuan (209 mm yr(-1)), and Henan (195 mm yr(-1)) contributed the most to precipitation in China's drylands through moisture recycling. From 2001 to 2020, although 71% of source areas exhibited an increase in water vapor transported to China's drylands, China's drylands still experienced an overall water vapor deficit, acting as sources of atmospheric water vapor and contributing to precipitation in downwind areas. Additionally, the water vapor budget exhibits spatial variability: eastern regions of China's drylands suffer severe water vapor deficits, while western areas have a surplus. This explains the observed trends of increasing dryness in the east and rising humidity in the west in recent years. Together, our results highlight the central role of vegetation-mediated moisture recycling in sustaining dryland precipitation and emphasize the need to incorporate land-atmosphere coupling into water management, climate adaptation and ecosystem restoration strategies.