Summary: 1. Arbuscular mycorrhizal (AM) fungi and ammonia oxidizers (AO) represent key soil microbial groups regulating nitrogen (N) cycling in terrestrial ecosystems. Both utilize soil ammonium‐N reserves for N assimilation, whilst the latter, through autotrophic nitrification, drive ammonia oxidation to highly mobile nitrate‐N.2. An incompatible interaction between root symbiotic AM fungi and AO was hypothesized and evaluated in plant–species‐rich, N‐limited Mediterranean grassland soils. Such an outcome would be manifested in a negative relationship between plant mycotrophy and local soil potential nitrification rates (PNR), a standard functional measure of ammonia‐oxidizing activity in soils.3. In three independent mesocosm experiments, grassland soils that supported monocultures of mycotrophic, as opposed to weakly and non‐mycotrophic, plants exhibited significantly lower PNR. Under field conditions in a fourth experiment, we verified that soils from stands of weakly mycotrophicAgrostis capillarissustained higher PNR than counterparts supporting highly mycorrhizalPrunella vulgarisandFragaria vesca.4. Discussion of mycotrophy‐related modulation of AO activity centres on whether the observed relationships highlight evidence for either direct competition or a functionally important example of plant–microbial allelopathy.5. Synthesis. Substantial evidence has been presented confirming (i) plant species identity‐related regulation of PNR and (ii) negative relationships between plant mycotrophy and plant species‐mediated impact on PNR in N‐limited Mediterranean grassland soils. Likely mechanisms (i.e. competition and/or allelopathy) that underpin this functionally significant plant–microbe–soil relationship controlling the fate of ammonium‐N require urgent elucidation in N‐deficient ecosystems.