Small-scale heterogeneity of plant cover and highly variable precipitation events in dry regions can strongly influence N dynamics. We evaluated the differences in N availability (Ni), N mineralization (Nmin), flush of microbial-N (N-MF) and soil moisture (SM) at 0–20 cm depth among four types of patches characteristic of heavily grazed areas in the northeastern Patagonia steppe of Larrea divaricata and Stipa spp. Soil samples were taken monthly during two years of differing annual precipitation (178 mm in 1994 and 325 mm in 1995). Ni and SM were also measured at 20–40 cm depth. Additionally, we estimated the potential N mineralization (pNmin) during two months in both winter and summer in laboratory incubations at 20% soil moisture and 25°C. Sampled patches included: undisturbed patches of shrubs and perennial grasses (GSP), incipient patches of Larrea divaricata and perennial grasses (IGSP), incipient patches of the perennial grass Stipa tenuis (GP), and bare soil (BS). Mineralization rates were much higher during the wet year, and higher in GSP and IGSP than in GP and BS. The prevailing form of Ni was NH4+–N, but pulses of NO3-–N were measured in field incubations when SM was higher than 10%; NO3-–N was also the main form of Ni in pNmin assays. Flush of microbial-N depended mainly on plant cover, following the sequence: GSP>IGSP>GP=BS. It was not correlated with soil moisture, except in the GSP patches, and exhibited lower values during the wet year. Available N (as NH4+–N) was higher in the subsurface than in the surface samples during the wet year. The relative importance of N-MF and Nmin as indicators of spatial and temporal changes in N dynamics, and the role of deep-rooted shrubs in the recovery of soil N fertility, are discussed.