Previous studies have examined the effects of soil osmotic potential (Ψs) on net rates of mineralization and nitrification. Because net rates represent the difference between gross production and consumption processes, it is unclear which process is being affected. We used an15N isotopic dilution method to evaluate the effects of Ψson gross rates of nitrification, ammonification, NH+4assimilation, and NO-3assimilation, and net rates of nitrous oxide production in a Penoyer sandy loam at field capacity. To avoid creating specific ion toxicities that normally do not occur in this soil, we used a chemical equilibrium model to predict how solute concentrations in the soil solution change during evapo-concentration; then we used solutions containing these mixtures of solutes to create individual Ψstreatments. A nitrification potential assay was also performed to determine the effect of Ψson nitrification rates at high substrate concentrations. In soil slurries with elevated NH+4concentration (1110 μM), nitrification rates declined exponentially with reduced Ψs(increased salt concentration); however, in soil samples incubated at field capacity without added NH+4(9.7 μM, or 2 mg N kg-1), the gross nitrification rate was independent of Ψs. The differential response between slurries and soil at field capacity was attributed to differences in NH+4concentrations, and indicated that the effects of Ψswere secondary to NH+4concentrations in controlling nitrification rates. Nitrification rates in slurries declined more when a single salt (K2SO4) was used than when the mixture of salts that more closely approximated the solute composition predicted to occur in the field was used to lower Ψs. This suggests that nitrifying bacteria are capable of adapting to specific ion toxicities. Gross rates of ammonification declined exponentially with decreased Ψsbetween 0 and -500 kPa but were independent of Ψsat potentials of -500 to -1750 kPa. Rates of microbial assimilation of NO-3exceeded NH+4assimilation by a factor of 4, indicating that under NH+4limited conditions substantial NO-3assimilation can occur. Microbial assimilation of both NH+4and NO-3declined exponentially with decreased Ψs, and were insignificant at <-1500 kPa Ψs. Because NO-3assimilation declined more rapidly than gross nitrification, net nitrification rates actually increased with declining Ψs. Rates of nitrous oxide (N2O) production were also inversely correlated with Ψs. Our results indicate that in previous studies, measurement of net rates, use of inappropriate salts, and addition of substrate may have resulted in over-estimation of the adverse effects of low Ψson rates of N-transformations.