Plants and soil microbes utilize the same pool of essential soil nutrients. Nitrogen is the limiting factor in plant growth. Therefore the effects of surface-applied mulches on soil fertility generally will be determined by the competition between plants and microbes for nitrogen. The key to understanding how different mulches affect soil nutrient availability lies in understanding the role of soil microbes in nutrient cycling, and how microbes respond to addition of organic matter. Mulching with composted yard trimmings and ground wood pallets had dramatic effects on soil organic matter, microbial activity, and nitrogen cycling that were apparent after only one season. Both increased organic matter content of the soil relative to the bare soil control, with the yard trimmings compost having the most substantial effect. Both materials also increased microbial biomass as indicated by increased microbial nitrogen and a doubling of soil respiration.