Anthropogenic activities have made phosphorus (P) a new sustainability issue globally. To better understand the mechanisms of soil P dynamics responding to inorganic P fertilization (0–12.5 g P m−2yr−1), we conducted a 2-year field experiment in a temperate grassland in northern China. The P fertilizer was added once per year before the growth period as NaH2PO4. We randomly collected topsoil samples (0–10 cm) and analyzed the soil properties, microbial community, and extracellular enzyme activities, and quantified the soil P fractions using solution 31P nuclear magnetic resonance (31P NMR) spectroscopy. P application promoted transformation from organic P to inorganic P driven by microbial carbon (C) demand and regulated by altered soil properties and microbial characteristics. P addition decreased orthophosphate diesters, especially DNA, due to increased hydrolysis under increased soil pH. This may increase hydrolysates such as α-glycerophosphate and choline phosphate. Orthophosphate monoesters, especially myo-inositol hexaphosphate, also decreased following increased P availability. This could be explained by increased alkaline phosphatase activity and reduced sorption due to a decreased metal (Ca, Al, and Fe) content. Furthermore, P fertilization increased soil NH4+-N, thereby increasing the growth of phosphonate-solubilizing microorganisms (Bacillus, Streptomyces, Bradyrhizobium, Mesorhizobium, Penicillium, Aspergillus, and Fusarium). Their increased growth also contributed to inorganic P solubilization and organic P mineralization due to their P-solubilizing specificity. Together, these factors increased inorganic P, especially orthophosphate, which was temporarily immobilized in microbial cells, to regulate the soil-solution P supply, and created a potentially available P sink in the grassland.