Nitrous oxide (N2O) is a potent greenhouse gas. Agricultural soils are the major source of N2O contributing more than 70% of the global N2O emissions. In soil, N2O is mainly produced during the microbial mediated nitrification and denitrification processes. These processes are influenced by several factors. Nitrification is governed by a few species of bacteria, archaea, and fungi, whereas, several species are involved in the denitrification process. Recently, several improved molecular approaches particularly different omics technologies namely genome sequencing, proteomics, metagenomics, meta-transcriptomics, etc. are being used for microbial diversity assessment, identification of metabolic pathways as well as recovery of the abundant uncultivable microbial genomes along with the genes involved in N2O production but also necessary for mitigation of N2O emission from agricultural soils. Various studies on the N2O production pathways and factors affecting from the agricultural soils are being elaborately documented. However, the molecular perspective of the N2O production in agricultural soils is not well-addressed. Thus, a better understanding of N2O production pathways, factors affecting, and identification of soil microbial and ecological diversity will provide great insight into the mitigation of N2O emission from agricultural soils. This review aims to explore in detail the published literature for a better understanding of soil microbial dynamics in both aerobic and anaerobic environment and how nitrogen saturation disrupts microbial and ecosystem functioning. The impact of impending climate change on soil microbiome along with their interaction with soil environment and plant communities is also discussed.