Drought and salinity are the most serious environmental factors affecting crop productivity worldwide; hence, it is important to select and develop both salt- and drought-tolerant crops. The perennial smooth cordgrass Spartina alterniflora Loisel is unusual in that it is highly salt-tolerant and seems to prefer ammonium (NH4+) over nitrate (NO3−) as an inorganic N source. In this study, we determined whether Spartina's unique preference for NH4+ enhances performance under salt and drought stress. Greenhouse experiments were conducted to compare the interactive effects of N source, salinity, and low water availability on plant performance (growth and antioxidant metabolism). Drought significantly reduced growth and photosynthetic activity in S. alterniflora, more so with NH4+ than NO3−; in contrast, NH4+ enhanced growth under high salinity. The increased tolerance of S. alterniflora to salt stress in the presence of NH4+ was linked to a high level of antioxidant enzyme activity, combined with low MDA content, EL, and H2O2 production. In contrast, drought stress negated the growth advantages for S. alterniflora exposed to salt stress in the presence of NH4+. The susceptibility of S. alterniflora to drought was partly due to reduced antioxidant enzyme activities, thereby reducing the defense against the oxidative damages induced by osmotic stress. In conclusion, in contrast to salt stress, drought stress negates the beneficial effects of ammonium as an N source in the C4 plant Spartina alterniflora.