In alpine grasslands, nutrient limitation, especially nitrogen limitation, is a known factor. The application of nitrogen fertilizer is commonly used to restore degraded grasslands. However, the effects of nitrogen types, levels, and time scales on plant species diversity and the driving mechanisms of ecosystem multifunctionality remain poorly understood. To address this gap, our study focused on slightly degraded alpine grasslands in the Three Rivers Source Region. We conducted a six–year nutrient addition experiment using three different types of nitrogen fertilizers ((NH ₄) ₂SO ₄, KNO ₃, and CH ₄N ₂O). We analyzed changes in biodiversity, vegetation productivity, and ecosystem functionality following nitrogen addition. Our findings showed that short-term nitrogen addition enhanced species diversity and aboveground biomass. Under short–term nitrogen addition, species diversity showed a linearly negative correlation with ecosystem multifunctionality, whereas no correlation was observed under long–term nitrogen addition. Through structural equation model, it was determined that under short-term nitrogen addition, where nitrogen forms and levels primarily affect species richness by increasing species acquisition rates. In contrast, long-term nitrogen addition impacted species diversity through increased species loss rates, with no effect on ecosystem multifunctionality. These findings offer crucial evidence regarding the mechanisms of nitrogen addition on plant communities and ecosystems, providing valuable theoretical support for the ecological restoration of degraded alpine grasslands.