Long-term data (20 years) on wheat (Triticum aestivum) grain yield under various fertilizer-nitrogen (N) and water conditions in rainfed and irrigated environments of sub-tropical north India were used to assess the magnitude and economics of N response in relation to amount and timing of irrigation. Treatments comprised combinations of fertilizer N rates (ranging from 0 to 150 kg ha−1) and irrigation regimes (rainfed, supplemental, limited, and adequately irrigated). Regression analysis of wheat yield against available water supply and fertilizer N showed a strong interaction between the two variables for grain yield and input use efficiency. The effect, on grain yield and returns, of increasing the N rate for a given water supply was influenced by the irrigation regimes. Economic optimization of water and N, based on constrained profit maximization technique, showed that optimum amounts of available water (or irrigation) and fertilizer N are related directly to the capital investment. Increased input prices lowered their optimum levels for a given investment. The analysis suggests an approach for resource allocation that relates to capital investment and input prices.