Biodegradable plastic mulching films are regarded as promising substitutes for their non-degradable counterparts to ameliorate serious plastic pollution in agriculture. Inevitably, biodegradable microplastics (BMs) can be formed and profoundly affect the function of soil ecosystems. However, little is known about the effects of BMs loading on soil nitrogen (N) dynamics and loss in tropical agricultural soils. Hereby, a 120-day soil incubation trial was performed to evaluate the effects of polybutylene adipate co-terephthalate (PBAT) microplastics on nitrous oxide (N2O) emissions, N transformation, and bacterial community structure in latosols. The results showed that PBAT addition raised soil ammonium nitrogen (NH4+–N) and dissolved organic carbon (DOC) contents, but lowered nitrate nitrogen (NO3––N) contents, accompanied with a smaller potential nitrification rate and a greater potential denitrification rate. The microbial biomass nitrogen and nrfA gene abundance were increased by PBAT, suggesting the processes of microbial N immobilization and dissimilatory nitrate reduction to ammonia were largely promoted. Positive correlations existed between N2O emissions and denitrification-related enzymatic activities and functional gene abundances (narG, nirK/S and Fungal nirK). PBAT amendment stimulated N2O emissions by 54.8 − 317.3 %, accompanied with increased values of those denitrification-related parameters, suggesting that stimulated denitrification was responsible for the exacerbated N2O emissions. Moreover, PBAT addition changed bacterial alpha diversity and bacterial community composition, where the relative abundances of Proteobacteria increased while those of Nitrospirae and Acidobacteria decreased. These findings are beneficial to understanding the fate of N in microplastics-polluted soil, which will provide a new insight into the impact of BMs on soil functions and environmental risks.