In groundwater-fed desert wetlands, groundwater table (GWT) decline leads to the loss of carbon and nutrients, followed by the expansion of desertification. How the GWT decline affects soil nutrient cycling and microbial resource limitation is still unclear. Here, we sampled soils along a steep GWT decline gradient in desert wetlands and surroundings traversing marshland (ML), sandy grassland (SG) and bare sandy land (SL) in the southern margin of Mu Us Sandy Land, China, then determined the extracellular enzyme activity (EEA, including carbon (C)-, nitrogen (N)- and phosphorus (P)-acquiring enzymes) and related soil environmental variables, and quantified the relative value of microbial metabolic limitation by vector analysis. Results showed that GWT decline eventually inhibited the activities of soil C-, N- and P-acquiring enzymes, which might be unfavourable for nutrient cycling. The relationship between soil microbial C limitation and GWT showed a downwards unimodal trend, despite the largest SOC value observed in ML. However, microbial P limitation was relieved by a slight GWT decline, and the continuous decline in GWT eventually shifted microorganisms from P to N limitation. We further provide evidence that DOC and C:P were the key factors explaining the variations in microbial C and nutrient limitations along the decline in GWT, respectively. Altogether, these findings suggest that soil EEA and microbial resource limitation exhibit close relationships with GWT decline in desert wetlands. Moreover, they highlight that alleviating microbial N limitation may be the primary solution for vegetation restoration and carbon sequestration in sandy land around wetlands.