Abstract Purpose The fuel reduction prescribed burning and biochar application can have significant impacts on water and nitrogen (N) use efficiency of understory acacia species as well as soil carbon (C) and N pools in a suburban native forest subject to N deposition in Southeast Queensland, Australia. Methods We evaluated the impact of biochar application rates (0, 5.0 and 10.0 t biochar per hectare) and prescribed burning on soil-plant interactions in carbon (C) and N cycling in a suburban native forest in the first two years of biochar application or three and half years of the recently prescribed burning. Results Anthropogenic N deposition not only enhanced N losses caused by N leaching and denitrification, but also inhibited biological N fixation (BNF) by increasing N availability in forest systems. The Acacia leiocalyx with higher water use efficiency was more inclined to utilize easily available N resources (from N deposition), compared with A. disparismma. In this study, biochar application could indeed reduce N loss in forest soil and improve soil fertility by improving plant water and N use efficiency. Meanwhile, soil moisture content affected by biochar application also influenced soil N transformations by affecting soil microbial activity. Conclusion For urban forest soils, the high N availability caused by N deposition could inhibit the BNF in a suburban native forest ecosystem. The high-porosity physical structure of biochar applied increased the soil water content and soil N retention capacity.