Biological soil crusts (biocrusts) cover up to 60–70% of the soil surface in grasslands rehabilitated during the "Grain for Green" project implemented in the hilly Loess Plateau region in 1999. As biocrusts fix nitrogen (N), they are an important part of restoring soil fertility. We measured nitrogenase activity (NA) in biocrusts from sites rehabilitated at six different time periods to estimate 1) the effects of moisture content and temperature on NA in biocrusts of different ages and 2) the potential N contribution from biocrusts to soils and plants in this region. Results show that NA in the biocrusts was mostly controlled by the species composition, as the activity of biocrusts dominated by free-living soil cyanobacteria was significantly higher than that of moss-dominated biocrusts. Nitrogenase activity was also influenced by soil moisture content and ambient temperature, with a significant decline in activity when moisture levels were decreased to 20% field water-holding capacity. The optimal temperature for NA was 35–40 °C and 30–40 °C for cyanobacteria- and moss-dominated biocrusts, respectively. Biocrust fixed N is likely an important source of N in this ecosystem, as we estimated annual potential N inputs per hectare in these grasslands to be up to 13 kg N ha^-1 and 4 kg N ha^-1 for cyanobacteria- and moss-dominated biocrusts, respectively.