The global rise in anthropogenic reactive nitrogen (N) and the negative impacts of N deposition on terrestrial plant diversity are well-documented. The R* theory of resource competition predicts reversible decreases in plant diversity in response to N loading. However, empirical evidence for the reversibility of N-induced biodiversity loss is mixed. In a long-term N-enrichment experiment in Minnesota, a low-diversity state that emerged during N addition has persisted for decades after additions ceased. Hypothesized mechanisms preventing recovery of biodiversity include nutrient recycling, insufficient external seed supply, and litter inhibition of plant growth. Here we present an ODE model that unifies these mechanisms, produces bistability at intermediate N inputs, and qualitatively matches the observed hysteresis at Cedar Creek. Key features of the model, including native species' growth advantage in low-N conditions and limitation by litter accumulation, generalize from Cedar Creek to North American grasslands. Our results suggest that effective biodiversity restoration in these systems may require management beyond reducing N inputs, such as burning, grazing, haying, and seed additions. By coupling resource competition with an additional inter-specific inhibitory process, the model also illustrates a general mechanism for bistability and hysteresis that may occur in multiple ecosystem types.