Abstract: Soil organic carbon (SOC) plays a crucial role in nutrient cycling and mitigating global greenhouse gas effects. This study aimed to assess the influence of nitrogen fertilizer on straw carbon dynamics in soil and its implications for SOC accumulation. A pot experiment was conducted using paddy soil with wheat straw returning subjected to varying nitrogen application levels 0, 120, 240, 360 kg(N)∙hm⁻², denoted as N0, N120, N240, and N360, respectively. ¹³C-labeled wheat straw was applied, and soil samples were collected after rice maturity to analyze various carbon fractions, δ¹³C values, and soil microbial community composition. The results demonstrated that compared to the N0 treatment, SOC content significantly increased by 7.8% and 7.4% in the N240 and N360 treatments, respectively. Total nitrogen content significantly increased by 37.2% and 34.3%, dissolved organic carbon significantly increased by 33.7% and 48.6%, and microbial biomass carbon significantly increased by 97.9% and 89.6%, respectively. However, compared to N0 treatment, soil carbon-to-nitrogen ratios significantly decreased by 21.6% and 20.0% in N240 and N360 treatments, respectively. In the N120 treatment, no significant differences were observed in SOC, total nitrogen, carbon-to-nitrogen ratio, or dissolved organic carbon compared to the N0 treatment, although microbial biomass carbon content was significantly higher. Moreover, nitrogen fertilization with straw return significantly increased bacterial content by 24.7% to 55.4%, fungal content significantly increased by 18.3% to 30.2%, and total phospholipid fatty acid content significantly increased by 18.1% to 45.2%. Application of nitrogen fertilizer also enhanced the proportion of >2000 μm and 250–2000 μm aggregates, as well as the organic carbon stock in the free particulate organic carbon (fPOC) and intra-microaggregate particulate organic carbon (iPOC) fractions. Additionally, δ¹³C values in the fPOC and iPOC fractions significantly increased by 128.3% to 194.8% and 105.6% to 216.9%, respectively. However, at the highest nitrogen level 360 kg(N)∙hm⁻², the stocks of organic carbon fractions, except for the fPOC fraction, did not continue to increase. Structural equation modeling indicated that nitrogen fertilizer application enhanced SOC content by increasing dissolved organic carbon, augmenting organic carbon stock in the fPOC fraction, or stimulating microbial activity to boost organic carbon in the iPOC fraction. This study underscores the potential of judicious nitrogen fertilizer application under straw return to enhance straw carbon sequestration in soil and elevate soil organic carbon levels.