Different nitrogen levels (high nitrogen, HN 200 kg/hm²; medium nitrogen, MN 120 kg/hm²; and low nitrogen, LN 80 kg/hm²) and nitrogen distribution ratios (1：3, 2：2, and 0：4) were applied to cotton seedlings (variety: B). These cotton seedlings were then cultured using alternative partial root-zone irrigation (APRI) and subjected to a 15-day-drought stress. Plant height, stem width, root and shoot biomass, gas exchange parameters (including net photosynthetic rate [Pn], stomatal conductance [Gs], transpiration rate [Tr], and intercellular concentration of carbon dioxide [Ci]), leaf area, water use efficiency (WUE), total root length, root surface area, nitrogen use efficiency (NUE), and root-sourced (root tissue and root xylem sap) ABA concentrations of cotton seedlings were determined. The aim of this experiment was to clarify the available regulation of root-sourced ABA to cotton seedling growth and WUE. The results showed that nitrogen application with a suitable distribution ratio improved the regulation of root-sourced ABA to growth and WUE of cotton seedlings under drought stress, although NUE was not significantly related to root-sourced ABA. The HN-treated cotton seedlings showed the highest growth and biomass and had the largest root-sourced ABA concentrations and NUE but the smallest WUE. The LN-treated cotton seedlings showed the least growth and the lowest biomass, but had the highest WUE. Irrespective of nitrogen levels, the 0：4-distributed cotton seedlings were the weakest, but the 1：3-distributed were the strongest with the highest NUE, WUE, and root-sourced ABA concentration. There were no obvious differences of growth, root and shoot morphology, and leaf area between 1：3-distributed and 2：2-distributed cotton seedlings. The Pn of cotton seedlings was not affected by different nitrogen distribution ratios, and Ci was not influenced by different nitrogen levels or distribution ratios. The differences of gas exchange parameters, WUE, and root-sourced ABA concentration between 0：4-distributed and 1：3-distributed cotton seedlings were not significant. Therefore, less water consumption (less stomatal conductance and transpiration rate) and enhanced root morphology (larger total root length, root surface area, and higher fine root proportion) were stimulated by root-sourced ABA directly or indirectly to maintain better growth and higher WUE of cotton seedlings under drought stress, especially in the 1：3-distribution ratio of nitrogen. Although the 1：3-distributed cotton seedlings with LN had the highest WUE, those with MN had greater NUE, biomass, WUE. This treatment combination could realize higher production, less water consumption, and nitrogen application simultaneously.