Sediment microbial communities are an important sink for both organic and inorganic nitrogen (N), with microphytobenthos (MPB) biomass making the largest contribution to short-term N-assimilation and retention. Coastal waters are increasingly subject to anthropogenic nutrient enrichment, but the effect of nutrient enrichment on microbial assimilation, processing, and fate of MPB-derived N (MPB-N) remains poorly characterised. In this study, an MPB-dominated microbial community was labeled in situ with a pulse of ¹⁵NH₄⁺-N. Laboratory core incubations of this labeled sediment under increasing nutrient concentrations (NH₄⁺ and PO₄³⁻: ambient, 2 × ambient, 5 × ambient, and 10 × ambient) were used toinvestigate changes in the processing and flux pathways of the ¹⁵N-labeled MPB-N across 10.5 d under nutrient enrichment. Short-term retention of MPB-N by MPB was stimulated by nutrient addition, with higher ¹⁵N in MPB in the nutrient amended treatments (71–93%) than in the ambient treatment (38%) at 0.5 d After 10.5 d, the nutrient amended treatments had increased turnover of MPB-N out of MPB biomass into an uncharacterised pool of sediment ON (45–75%). Increased turnover of MPB-N likely resulted from decreased recycling of MPB-N between MPB and heterotrophic bacteria as inorganic nutrients were preferentially used as an N source and remineralisation of sediment ON decreased. Decreased breakdown of sediment ON reduced the efflux of MPB-N via DON in the amended (3.9–5.2%) versus the ambient treatment (10.9%). Exports of MPB-N to the water column were relatively small, accounting for a maximum of 14% of ¹⁵N exported from the sediment, and were predominantly exported DON and N₂ (denitrification). Overall, there was considerable retention of MPB-N over 10.5 d, but increased nutrient loading shifted N from MPB biomass into other sediment ON.