Grasslands are important in sub-boreal climate agricultural systems and are managed with various combinations of N fertilization and plant species. Ammonia-oxidizing and denitrifying microorganisms are key players in determining the fate of nitrogen (N) and thereby also the yield in grassland systems and their impact on gaseous N losses and leaching. We established a three-year field study in southern Finland with fertilizer treatment as a main-plot factor, including organic and synthetic fertilizers and plant species and mixtures thereof as the sub-plot factor. We quantified six genes encoding key N-cycling enzymes by quantitative PCR to determine the abundance of the communities involved in N-transformation processes and also included previously published data on crop yield, soil properties and the overall bacterial community composition. With the exception of ammonia oxidizing bacteria (AOB), which were primarily affected by fertilization, the abundances of all other N-cycling communities changed over time with either an increase or decrease from summer to autumn. Differences in gene abundances between plant species treatments and in fertilizer by plant species interactions were detected mainly in the beginning of the cropping season during the first year. The nirS-type denitrifiers and nosZII nitrous oxide reducers responded more to changes in soil properties than their functional counterpart nirK and nosZI communities. Using structural equation modeling, we show that the overall microbial community composition and diversity played an important role in mediating the management effects on crop yield, genetic potential for N retention and N2O sink capacity. However, a trade-off between the genetic potential for N retention and N2O sink capacity was detected, indicating the challenges in managing grasslands in a sustainable way.ER - Grasslands are important in sub-boreal climate agricultural systems and are managed with various combinations of N fertilization and plant species. Ammonia-oxidizing and denitrifying microorganisms are key players in determining the fate of nitrogen (N) and thereby also the yield in grassland systems and their impact on gaseous N losses and leaching. We established a three-year field study in southern Finland with fertilizer treatment as a main-plot factor, including organic and synthetic fertilizers and plant species and mixtures thereof as the sub-plot factor. We quantified six genes encoding key N-cycling enzymes by quantitative PCR to determine the abundance of the communities involved in N-transformation processes and also included previously published data on crop yield, soil properties and the overall bacterial community composition. With the exception of ammonia oxidizing bacteria (AOB), which were primarily affected by fertilization, the abundances of all other N-cycling communities changed over time with either an increase or decrease from summer to autumn. Differences in gene abundances between plant species treatments and in fertilizer by plant species interactions were detected mainly in the beginning of the cropping season during the first year. The nirS-type denitrifiers and nosZII nitrous oxide reducers responded more to changes in soil properties than their functional counterpart nirK and nosZI communities. Using structural equation modeling, we show that the overall microbial community composition and diversity played an important role in mediating the management effects on crop yield, genetic potential for N retention and N2O sink capacity. However, a trade-off between the genetic potential for N retention and N2O sink capacity was detected, indicating the challenges in managing grasslands in a sustainable way.