Gully erosion is a kind of intense soil erosion process, which leads to the surface morphology of gully development area in an unstable state of significant change. Natural restoration of vegetation through prohibition is one of the main modes of gully management in Yuanmou Dry-hot valley. However, under the comprehensive effect of continuous restoration of gully vegetation and significant development of gully, the changing trend of soil carbon and nitrogen content in gully remains to be clearly defined. In this study, a typical gully in Yuanmou Dry-hot valley was selected, and 81 samples of 1 m×1 m were randomly arranged. The vegetation index, elevation changes caused by the erosion/sedimentation process, and soil physical and chemical properties of the 81 samples were measured at the beginning of the dry season in 2012 and 2017, the results showed that: (1) The vegetation conditions in the gully in 2017 were significantly better than that in 2012, and the vegetation changes within the range of runoff erosion on the surface of the gully bed were the most obvious, and the vegetation cover, number, and height increased by 313.61%, 94.29%, and 33.33%, respectively. (2) During the five years, the gully development area was dominated by sedimentation, and the proportions of erosion and sedimentation were 22.22% and 77.78%, respectively. With the increase of vegetation cover, the sand content of the soil showed a decreasing trend, and the silt content showed an increasing trend. (3) Although the vegetation recovered significantly during the period of prohibition, the soil carbon and nitrogen did not improve significantly. Soil carbon and nitrogen were not only significantly positively correlated with vegetation cover and soil particle-size, but also significantly negatively correlated with elevation changes of quadrate points. The severity of topographical changes in the gully was significantly higher than that of surface erosion, and it had a significant impact on the carbon and nitrogen of the surface soil of the gully. This study will help to identify the comprehensive effects of vegetation restoration and gully development on soil carbon and nitrogen, and provide support for the restoration of the degraded gully ecosystem in Dry-hot valley.