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Nitrogen deposition can change the soil in N and C cycling processes. However, a general understanding of how N deposition changes C and N mineralization has not yet been reached. Soil organic C and N mineralization beneath the dominant shrubs of <i>Haloxylon ammodendron</i> and between the shrubs in response to two levels of N addition (2.5 gN m⁻² and 5 gN m⁻² per year) were investigated in the 1st, 4th, and 9th year of N addition in a temperate desert of northern China. N addition promoted soil N mineralization (R_mN), and the nitrification rate (R_NN) increased C mineralization in the interplant and decreased it beneath shrubs. N addition increased soil microbial biomass C (C_mic), N (N_mic), and PLFAs in the interplant, and decreased it beneath shrubs. R_mN and R_NN were related to N_mic, and R_CM was related to C_mic and the total PLFAs. N addition increased the fungal biomass alongside the ratio of fungal to bacterial PLFAs in the interplants while decreasing them beneath shrubs. Our results support how N addition can increase soil N mineralization and nitrification, but the effects on soil C mineralization are dependent on the amount of nitrogen addition, the soil’s available carbon content, and water. Finally, the divergent responses of microbial communities to N addition between microsites suggest that the “fertile islands” effects on nutrients and microbial biomass are important when estimating feedbacks of C and N cycling to projected N deposition in the desert ecosystem.