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1. Aridland ecosystems cover about one-third of terrestrial environments globally, yet the extent to which models of carbon (C) and nitrogen (N) cycling, developed largely from studies of mesic ecosystems, apply to aridland systems remains unclear.

2. Within aridland ecosystems, C and N dynamics are often described by a pulse-reserve model in which episodic precipitation events stimulate biological activity that generate reserves of biomass, propagules and organic matter that prime the ecosystem to respond rapidly to subsequent precipitation events.

3. The role of microbial C and N processing within the pulse-reserve paradigm has not received much study. We present evidence suggesting that fungi play a critical and underappreciated role in aridland soils, including efficient decomposition of recalcitrant C compounds, N-transformations such as nitrification, and nutrient storage and translocation of C and N between plants and biotic soil crusts. While fungi may perform some of these functions in other ecosystems, this ’fungal loop’ assumes particular importance in the N cycle in aridlands because water availability imposes even greater restrictions on bacterial activity and physicochemical processes limit accumulation of soil organic matter (SOM).

4. We incorporate these findings into a Threshold-Delay Nutrient Dynamics (TDND) model for aridland ecosystems in which plant responses to pulsed precipitation events are mediated by a fungal loop that links C and N cycling, net primary production (NPP) and decomposition in aridland soils.

5. Synthesis. Arid ecosystems are highly sensitive to global environmental change including N deposition and altered precipitation patterns; yet, models from mesic ecosystems do not adequately apply to aridland environments. Our ’fungal loop’ N cycle model integrates spatial structure with pulse dynamics and extends the pulse-reserve paradigm to include the key role of microbial processes in aridland ecosystem dynamics.