Abstract: Nitrate nitrogen (NO₃⁻-N) is the main form of nitrogen released from crop straws under dry farming conditions, and is the main form of nitrogen absorption by the roots and the plant root growth regulatory signal of cotton. Straw return affects the availability of soil and fertilizer N, thus inhibiting the early growth of crops and even decreasing crop yields. The straw return also releases many phenolic acids, inhibiting crop seed germination and root growth. This study aimed to reveal the mechanisms by which the contents dynamics of NO₃⁻-N and phenolic acid in the soil affect the growth of cotton seedlings under the return of wheat straw. Based on the 11-year return of wheat straw, field experiments were conducted in 2021 and 2022 at Jiangsu Academy of Agricultural Sciences Experimental Station in Nanjing, Jiangsu Province, China. Two treatments, wheat straw removal (CK) and wheat straw return (S), were applied. The contents of NO₃⁻-N and phenolic acid in the soil of the subsequent cotton field, the NO₃⁻-N content and nitrate reductase activity of cotton seedlings, the activity and morphology indices of cotton roots, and the biomass of cotton seedlings were investigated. The results demonstrated that straw return increased the contents of NO₃⁻-N and phenolic acid in the soil, and the effect on the 0–20 cm soil layer was greater than that on the 20–40 cm soil layer. With a delay of days after the straw return, the contents of NO₃⁻-N and phenolic acid in the soil increased and then decreased, reaching a peak at 24−31 d after the straw return. Within 31 days of straw return, the root activity, root NO₃⁻-N content, nitrate reductase (NR) activity, root biomass, and morphological indices of cotton seedlings under the straw return treatment were significantly lower than those under the CK treatment but showed the opposite trend after 31 d of straw return. The correlation analysis showed that phenolic acid content in 0–20 cm soil were significantly and negatively correlated with the root activity, NO₃⁻-N content, length, diameter, and surface area of the root, and the aboveground biomass of cotton seedlings. The NO₃⁻-N content in different soil layers was positively correlated with the index of morphology and physiology and the biomass of cotton seedlings but did not reach a significant level. The effect of straw return on the growth of cotton seedlings showed a trend of “first inhibition and then promotion”. Within 31 d after straw return, the “inhibition effect” of phenolic acid in soil on the growth of cotton seedlings was greater than that of the “fertilization effect” of straw. Higher phenolic acid content reduced the root activity and root growth of cotton seedlings, inhibiting the absorption and utilization of NO₃⁻-N in cotton seedlings. After 31 d of straw return, the “fertilization” effect of straw was greater than the “inhibition” effect of phenolic acid, promoting the root growth of cotton seedlings.