The application of crop residues is a common agricultural practice used to enhance soil health. However, the use of low-quality crop residues can lead to nitrogen (N) depletion in soil due to microbial immobilisation. This microbial activity is influenced by many factors including residue quality, soil type and interactions with higher trophic levels such as microarthropods. To investigate the processes influencing the effectiveness of crop residue application, we conducted a field mesocosm experiment using barley plants grown in either chernozem or sandy soil. As a second factor, low-quality crop residue was added to half of the mesocosms. All soils were initially defaunated, with half subsequently refaunated. Over a three-month period, we measured barley biomass and N content, soil microbial activity, and soluble and soil N concentrations. Inorganic N dynamics were more pronounced in chernozem soil, while differences in crop yield and plant N content were more evident in sandy soil. Residue addition stimulated microbial activity. Although it did not directly deplete soil nitrate, its negative effects were reflected in reduced crop yield and lower leaf N content. Faunal presence significantly reduced nitrate leaching and increased soil nitrate concentrations in both soil types. Moreover, faunated mesocosms exhibited higher microbial activity and crop yield compared to defaunated ones. These findings highlight the critical role of soil microarthropods in mediating the effects of crop residue on plant performance. Thus, maintaining functional soil faunal communities is essential for improving nitrogen retention and crop productivity in residue-amended agricultural systems.