Tropical smallholder agriculture supports the livelihoods of over 900 million of the world’s poorest people. This form of agriculture is undergoing rapid transformation in nutrient cycling pathways as international development efforts strongly promote greater use of mineral fertilizers to increase crop yields. These changes in nutrient availability may alter the composition of microbial communities with consequences for rates of biogeochemical processes that control nutrient losses to the environment. Ecological theory suggests that altered microbial diversity will strongly influence processes performed by relatively few microbial taxa, such as denitrification and hence nitrogen losses as nitrous oxide, a powerful greenhouse gas. Whether this theory helps predict nutrient losses from agriculture depends on the relative effects of microbial community change and increased nutrient availability on ecosystem processes. We find that mineral and organic nutrient addition to smallholder farms in Kenya alters the taxonomic and functional diversity of soil microbes. However, we find that the direct effects of farm management on both denitrification and carbon mineralization are greater than indirect effects through changes in the taxonomic and functional diversity of microbial communities. Changes in functional diversity are strongly coupled to changes in specific functional genes involved in denitrification, suggesting that it is the expression, rather than abundance, of key functional genes that can serve as an indicator of ecosystem process rates. Our results thus suggest that widely used broad summary statistics of microbial diversity based on DNA may be inappropriate for linking microbial communities to ecosystem processes in certain applied settings. Our results also raise doubts about the relative control of microbial composition compared to direct effects of management on nutrient losses in applied settings such as tropical agriculture.