Nitrogen (N) fertilization may profoundly affect soil microbial communities. In this study, a field fertilization experiment was conducted in temperate grassland in Inner Mongolia, China to examine the effect of N fertilization on soil microbial properties and the main factors related to the characteristics of soil microbial community. Soil microbial biomass carbon (MBC) and microbial functional diversity along an N gradient were measured over three months (June to August). The result showed that N fertilization significantly decreased MBC under high N treatment (N200, 200 kg N ha−1 y−1) compared with the control (N0, 0 kg N ha−1 y−1) in the three months. Microbial functional diversity in July and August were significantly increased by low N treatment (N50, 50 kg N ha−1 y−1). Among the three fertilization treatments, microbial functional diversity under N200 in the three months was significantly lower than that of N50. The decrease of MBC and functional diversity under N200 were mainly due to the significant decline of plant belowground biomass under high N treatment. The increase of functional diversity under N50 treatment was due to the higher plant aboveground biomass as a result of the higher soil moisture availability. This finding highlighted that the higher N fertilization (N200) was not suitable for the growth and improvement of functional diversity of the soil microbial community, and that site and plant community play an important role in regulating the characteristics of soil microbial community.