Background/Question/Methods Moisture is a key factor governing soil nitrogen (N) biogeochemistry; it controls microbial activity and, therefore, the cycling of N. Ongoing climate change is altering precipitation regimes, increasing the frequency and intensity of droughts across regions with implications for ecosystem N cycling. Disentangling how drought can alter the balance between ecosystem N loss and retention is challenging because both biotic and abiotic processes interact to control N dynamics. In this sense, drylands provide an ideal opportunity to study how drought affects N cycling because i) they can experience several months without rain and 2) biotic–abiotic interactions can be interrogated by contrasting soils developing under “islands of fertility” and under bare interspaces between shrubs. Results/Conclusions In this talk, I will show how soil microscale processes can help explain how N retention and loss trade off under drought by: 1) discussing how physiological stress breaks down the transfer of metabolites between microorganisms, allowing “metabolic handoffs” to be lost through processes independent of biological N demand and by 2) demonstrating this concept in the field using a rainfall manipulation experiment, isotopes of nitric oxide (NO) and nitrous oxide (N2O), and inhibition assays.