Elevated CO2, N deposition and climate change can alter ecosystem-level nutrient cycling both directly and indirectly. We explored the interactive effects of these environmental changes on extracellular enzyme activity and organic matter fractionation in soils of a California annual grassland. The activities of hydrolases (polysaccharide-degrading enzymes and phosphatase) increased significantly in response to nitrate addition, which coincided with an increase in soluble C concentrations under ambient CO2. Water addition and elevated CO2 had negative but nonadditive effects on the activities of these enzymes. In contrast, water addition resulted in an increase in the activities of lignin-degrading enzymes (phenol oxidase and peroxidase), and a decrease in the free light fraction (FLF) of soil organic matter. Independent of treatment effects, lignin content in the FLF was negatively correlated with the quantity of FLF across all samples. Lignin concentrations were lower in the aggregate-occluded light fraction (OLF) than the FLF, and there was no correlation between percent lignin and OLF quantity, which was consistent with the protection of soil organic matter in aggregates. Elevated CO2 decreased the quantity of OLF and increased the OLF lignin concentration, however, which is consistent with increased degradation resulting from increased turnover of soil aggregates. Overall, these results suggest that the effects of N addition on hydrolase activity are offset by the interactive effects of water addition and elevated CO2, whereas water and elevated CO2 may cause an increase in the breakdown of soil organic matter as a result of their effects on lignin-degrading enzymes and soil aggregation, respectively.