Water shortage and excessive chemical fertilizers application result in low soil water and nutrient availability and limit crop production in the Loess Plateau of Northwest China. Ammoniated straw incorporation with N fertilization may be an efficient strategy to maintain agricultural sustainability. However, the interactive effects of straw incorporation and N fertilizer on the biomass water use efficiency (WUE) in the winter wheat–summer maize rotation system remain unclear. A 3-year field experiment was conducted to evaluate the effects of combining ammoniated straw incorporation and N fertilizer on soil water, biomass yield and biomass water use efficiency (WUE) in an annual summer maize (Zea mays L.)—Winter wheat (Triticum aestivum L.) rotation system. There were three treatments: (i) long straw (5 cm) mulching with N fertilizer (CK), (ii) long straw with N fertilizer plowed into the soil (LP), and (iii) ammoniated long straw with N fertilizer plowed into the soil (ALP). Compared with the CK treatment, LP and ALP led to a similar soil water storage capacity. ALP improved summer maize biomass yield and winter wheat biomass yield at the jointing-maturity stage. ALP improved summer maize WUE at the ten-leaf collar-tasseling stage and winter wheat WUE from the tillering stage to the maturity stage. Also, the ALP treatment increased the total water use efficiency (TWUE) of winter wheat by 4.1–22.0%. Overall, ammoniated straw incorporation produced the most favorable biomass yield and WUE in the summer maize—Winter wheat rotation system in the Loess Plateau of China.