Under the current paradigm, organic matter decomposition and nutrient cycling rates are a function of the imbalance between substrate and microbial biomass stoichiometry. Challenging this view, we demonstrate that in an individual-based model, microbial community dynamics alter relative C and N limitation during litter decomposition, leading to a system behaviour not predictable from stoichiometric theory alone. Rather, the dynamics of interacting functional groups lead to an adaptation at the community level, which accelerates nitrogen recycling in litter with high initial C : N ratios and thus alleviates microbial N limitation. This mechanism allows microbial decomposers to overcome large imbalances between resource and biomass stoichiometry without the need to decrease carbon use efficiency (CUE), which is in contrast to predictions of traditional stoichiometric mass balance equations. We conclude that identifying and implementing microbial community-driven mechanisms in biogeochemical models are necessary for accurately predicting terrestrial C fluxes in response to changing environmental conditions.