The decomposition and transformation of above‐ and below‐ground plant detritus (litter) is the main process by which soil organic matter (SOM) is formed. Yet, research on litter decay and SOM formation has been largely uncoupled, failing to provide an effective nexus between these two fundamental processes for carbon (C) and nitrogen (N) cycling and storage. We present the current understanding of the importance of microbial substrate use efficiency and C and N allocation in controlling the proportion of plant‐derived C and N that is incorporated into SOM, and of soil matrix interactions in controlling SOM stabilization. We synthesize this understanding into the Microbial Efficiency‐Matrix Stabilization (MEMS) framework. This framework leads to the hypothesis that labile plant constituents are the dominant source of microbial products, relative to input rates, because they are utilized more efficiently by microbes. These microbial products of decomposition would thus become the main precursors of stable SOM by promoting aggregation and through strong chemical bonding to the mineral soil matrix.

Grasslands store approximately one third of the global terrestrial carbon stocks and can act as an important soil carbon sink. Recent studies show that plant diversity increases soil organic carbon (SOC) storage by elevating carbon inputs to belowground biomass and promoting microbial necromass contribution to SOC storage. Climate change affects grassland SOC storage by modifying the processes of plant carbon inputs and microbial catabolism and anabolism. Improved grazing management and biodiversity restoration can provide low-cost and/or high-carbon-gain options for natural climate solutions in global grasslands. The achievable SOC sequestration potential in global grasslands is 2.3 to 7.3 billion tons of carbon dioxide equivalents per year (CO ₂ e year ⁻¹ ) for biodiversity restoration, 148 to 699 megatons of CO ₂ e year ⁻¹ for improved grazing management, and 147 megatons of CO ₂ e year ⁻¹ for sown legumes in pasturelands.