The transformation of organic nitrogen compounds in the soils of tundra ecosystems of Northern Fennoscandia has been studied under laboratory and natural conditions. Tundra soils contain significant reserves of total nitrogen, but they are poor in its extractable mineral and organic forms. The potential rates of the net mineralization and net immobilization of nitrogen by microorganisms vary among the soils and depend on the C: N ratio in the extractable organic matter and microbial biomass of soil. Under natural conditions, the rate of nitrogen net mineralization is lower than the potential rate determined under laboratory conditions by 6–25 times. The incubation of tundra soils in the presence of plants does not result in the accumulation of mineral nitrogen compounds either in the soil or in microbial biomass. This confirms the high competitive capacity of plants under conditions of limited nitrogen availability in tundra ecosystems.