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Bread wheat (Triticum aestivum L.) production in Ethiopia, particularly in Central Oromia, is constrained by the continued use of blanket nitrogen (N) fertilizer recommendations that fail to account for site-specific conditions and increasing climate variability. This study aimed to optimize N management for yield and environmental sustainability and to determine economic optimum nitrogen rates (EONRs) under current and future climate scenarios. The CERES-Wheat model within the DSSAT framework was calibrated and validated to simulate wheat growth under multiple N application rates and split strategies across three representative locations (Degem, Fitche, and Bishoftu) using projected climate scenarios (SSP4.5 and SSP8.5) for the 2050s and 2080s. Model outputs were analyzed for grain yield, aboveground biomass, nitrogen uptake, nitrous oxide emissions, nitrogen leaching, and economic returns, and nitrogen response functions were used to estimate EONRs. Simulations showed that grain yield, biomass, N uptake, and N2O emissions increased very highly significant (P < 0.001) with increasing N rates, with the highest biological performance observed at 115 kg N ha−1 applied in three splits. Economic analysis indicated that 115 kg N ha−1 applied in three splits maximized net returns at Degem and Bishoftu, while two split applications were economically optimal at Fitche. The control treatment resulted in the lowest net benefit and marginal rate of return (0%). Nitrogen leaching was not significantly affected by fertilizer management, suggesting a stronger influence of climatic variability than N rate or splitting strategy. Nitrogen response function analysis projected higher future EONRs, ranging from 158–169 kg N ha−1 at Degem, 182–185 kg N ha−1 at Fitche, and 180–191 kg N ha−1 at Bishoftu. Overall, the results demonstrate that current blanket N fertilizer recommendations are suboptimal under both present and future climates. The study recommends adopting climate-smart, site-specific nitrogen management strategies supported by crop simulation models such as CERES-Wheat to enhance wheat productivity, profitability, and environmental sustainability in Ethiopia.