Background and aim <p>More intense episodes of drought are expected to affect terrestrial nitrogen (N) cycling by altering N transformation rates, the functioning of soil microorganisms, and plant N uptake. However, there is limited empirical evidence of how progressive water loss affects N cycling at the plant-soil interface.</p> Methods <p>We adopted ¹⁵N tracing techniques and metagenomic analyzes of microbial genes involved in N cycling to assess how different levels of soil water availability influenced the fate of N derived from decomposing litter in mesocosms with Scots pine saplings.</p> Results <p>With increasing water limitation, the release of N from decomposing litter into the soil declined rapidly. However, moderate levels of water limitation barely affected the microbial metagenome associated with N cycling and the uptake of N by the saplings. Comparatively, severe levels of water limitation impaired plant N uptake, and increased the prevalence of microbial N-cycling genes potentially involved in mechanisms that protect against water stress. Genes associated with the uptake and release of N during mineralization and nitrification declined under low soil water contents.</p> Conclusions <p>When soil water becomes largely unavailable, the cycling of N at the plant-soil interface is slowed down, and microbial and plant tolerance mechanisms may prevail over N uptake and microbial decomposition.</p>