Elevated atmospheric carbon dioxide (CO2) has the potential to alter soil carbon (C) and nitrogen (N) cycling in arid ecosystems through changes in net primary productivity. However, an associated feedback exists because any sustained increases in plant productivity will depend upon the continued availability of soil N. We took soils from under the canopies of major shrubs, grasses, and plant interspaces in a Mojave Desert ecosystem exposed to elevated atmospheric CO2 and incubated them in the laboratory with amendments of labile C and N to determine if elevated CO2 altered the mechanistic controls of soil C and N on microbial N cycling. Net ammonification increased under shrubs exposed to elevated CO2, while net nitrification decreased. Elevated CO2 treatments exhibited greater fluxes of N2O–N under Lycium spp., but not other microsites. The proportion of microbial/extractable organic N increased under shrubs exposed to elevated CO2. Heterotrophic N2-fixation and C mineralization increased with C addition, while denitrification enzyme activity and N2O–N fluxes increased when C and N were added in combination. Laboratory results demonstrated the potential for elevated CO2 to affect soil N cycling under shrubs and supports the hypothesis that energy limited microbes may increase net inorganic N cycling rates as the amount of soil-available C increases under elevated CO2. The effect of CO2 enrichment on N-cycling processes is mediated by its effect on the plants, particularly shrubs. The potential for elevated atmospheric CO2 to lead to accumulation of NH4+ under shrubs and the subsequent volatilization of NH3 may result in greater losses of N from this system, leading to changes in the form and amount of plant-available inorganic N. This introduces the potential for a negative feedback mechanism that could act to constrain the degree to which plants can increase productivity in the face of elevated atmospheric CO2.