In order to study the effect of drought stress at different reproductive growth stages and N rates on yield and water use efficiency (WUE) of fennel, a research was conducted as a split-plot experiment based on a RCBD with three replications, at Research Field of Islamic Azad University of  Birjand in 2010. The main plot was irrigation at three levels (irrigation cease at flowering and seed-filling stages as well as optimum irrigation) and the sub-plot was N fertilizer at four rates (0, 60, 120 and 180 kg N. ha^-1). Results showed that applying drought stress at flowering and seed-filling stages compared to optimum irrigation decreased umbel number per plant by 48.2 and 28.8%, seed number per umbel by 39.4 and 22.4%, seed yield by 69.7 and 52.6% and WUE for seed production by 65.6 and 65.9%, respectively. Moreover, increasing the nitrogen rate from 0 to 120 kg N. ha^-1 increased the umbel number per plant, seed yield, biological yield and WUE for seed and biomass production by 22.1, 24.3, 21.8, 34.5 and 20.4%, respectively. The interaction effect of irrigation x nitrogen was only significant in umbel number per plant and seed yield of fennel. In general, according to results of the current study, application of optimum irrigation with 60 kg N. ha^-1 can be recommended for fennel cultivation in the region due to preventing environmental problems as well as providing desirable yield and WUE of fennel.