Nitrous oxide (N2O) is an environmentally important atmospheric trace gas because it is an effective greenhouse gas and it leads to ozone depletion through photo-chemical nitric oxide (NO) production in the stratosphere. Mitigating its steady increase in atmospheric concentration requires an understanding of the mechanisms that lead to its formation in natural and engineered microbial communities. N2O is formed biologically from the oxidation of hydroxylamine (NH2OH) or the reduction of nitrite (NO2-) to NO and further to N2O. Our review of the biological pathways for N2O production shows that apparently all organisms and pathways known to be involved in the catabolic branch of microbial N-cycle have the potential to catalyze the reduction of NO2- to NO and the further reduction of NO to N2O, while N2O formation from NH2OH is only performed by ammonia oxidizing bacteria. In addition to biological pathways, we review important chemical reactions that can lead to NO and N2O formation due to the reactivity of NO2-, NH2OH and nitroxyl (HNO). Moreover, biological N2O formation is highly dynamic in response to N-imbalance imposed on a system. Thus, understanding NO formation and capturing the dynamics of NO and N2O build-up are key to understand mechanisms of N2O release. Here, we discuss novel technologies that allow experiments on NO and N2O formation at high temporal resolution, namely NO and N2O microelectrodes and the dynamic analysis of the isotopic signature of N2O with quantum cascade laser based absorption spectroscopy. In addition, we introduce other techniques that use the isotopic composition of N2O to distinguish production pathways and findings that were made with emerging molecular techniques in complex environments. Finally, we discuss how a combination of the presented tools might help to address important open questions on pathways and controls of nitrogen flow through complex microbial communities that eventually lead to N2O build-up.