Crop rotation and wheat straw return have significant potential to regulate soil respiration (Rs) and enhance soil health by increasing carbon pools, which is crucial in mitigating drought effects. This study aimed to examine the influence of organic agro-waste addition on Rs under rotation and monoculture through a 70-day incubation experiment. During Phase I (0–28 days), soils under monoculture with moisture of 15%, 30%, and 55% water holding capacity (WHC) were labelled CS, CM, and CC, while soils under rotation were labelled IS, IM, and IC. In Phase II (29–70 days), half of the treatments received organic agro-waste (CSO, CMO, CCO, ICO, IMO, and ISO), and moisture was adjusted to 55% WHC. Labile carbon in CR treatments increased by 14.7%–19.3% compared to other treatments in Phase 1. Metabolic quotient (qCO2) was 46.4%–77.1% lower in rotation treatments in comparison to other treatments after rewetting. Statistical analysis also indicated that crop rotation mitigated drought impacts by increasing labile C content and total microbial activity. Crop rotation can be effective for alleviation of drought impact via boosting soil labile pool and microbial activities, while residue returning may mask this alleviation by stimulating soil CO2 emission. PCA results indicated that no significant difference was observed after organic waste addition on day 70. Overall, crop rotation and the addition of organic waste could mitigate the negative effects of drought conditions by increasing organic matter and microbial activity.