Soil bulk density markedly influences hydrolysis of surface‐applied granular urea that is vulnerable to serious ammonia volatilization losses. In order to decrease the ammonia losses by retarding urea hydrolysis, several chemicals have been tested for their soil urease inhibition properties. Phenyl phosphorodiamidate (PPDA) is a potent soil urease inhibitor. Laboratory studies using soil column incubations were conducted to investigate the effect of soil bulk density on inhibition of hydrolysis of surface‐applied urea granules (=20 mg of urea/granule) containing 1% PPDA in unsaturated soils. The increase in soil bulk density (from 0.69 to 1.50 Mg/m3) markedly increased the rate of hydrolysis of surface‐applied urea granules and significantly decreased the apparent urease inhibition by PPDA present in the granules. These results are attributed to the probable spatial separation of urea and PPDA because of the differences in diffusive transports in unsaturated soils caused in part by differences in their solubilities in water.