Cavitation erosion is a predominant failure mode of austenitic stainless steels in corrosive fluid environments, severely limiting their durability in nuclear piping and hydraulic components. In this study, five 316LN steels with 0.008–0.34 wt.% nitrogen content were fabricated, and both short-term (2 h) and long-term (24 h) cavitation tests were performed to elucidate the effect and mechanism of nitrogen. Increasing nitrogen markedly enhanced cavitation resistance: after 24 h, the cumulative mass loss decreased by 36%, 52%, 60%, and 71% for 09N, 17N, 22N, and 34N relative to 00N, accompanied by lower surface roughness, shallower pit depth, and a prolonged incubation stage. SEM revealed a progressive damage process from twin/high-angle grain boundaries to intragranular deformation bands and finally to spalling at slip intersections, whereas high-N steels exhibited only slight local detachment. TEM demonstrated that nitrogen transformed dislocations from random networks into dense slip bands and planar arrays with stacking faults, raising hardness from ~140 HV to ~260 HV. EBSD further confirmed strain-induced martensite transformation under severe deformation, providing additional strengthening. These results reveal that nitrogen improves cavitation resistance by tailoring dislocation structures and enhancing strength–plasticity compatibility, offering guidance for the design of high-performance austenitic stainless steels in cavitation environments.