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Soil–plant interactions affecting nitrous oxide (N2O) are not well-understood, and experimental data are scarce. Therefore, a greenhouse experiment was conducted in a 3 × 3 full factorial design, comprising three mineral N fertilizer rates (0, 150 and 300 kg N ha−1) applied to monoculture swards and a binary mixture of Plantago lanceolata and Lolium perenne. The parameters measured included daily N2O emissions, aboveground (AG) and belowground biomass (BG), N and C yields, as well as leucine aminopeptidase (LAP) activity in the soil as an indicator for soil microbial activity. Nitrous oxide emission and LAP were measured using the static chamber method and fluorimetric microplate assays, respectively. Cumulative N2O emissions were about two times higher for P. lanceolata than L. perenne monoculture swards or the mixture (p < 0.05). The binary mixtures also showed the highest N use efficiency and LAP activity, which significantly (p < 0.05) correlated with the C concentration in the belowground biomass. Plantago lanceolata was generally ineffective at reducing N2O emissions, probably due to the young age of the swards. Among the biological factors, N2O emission was significantly associated with biomass productivity, belowground C yield, belowground N use efficiency and soil microbial activity. Thus, the results suggested belowground resource allocation dynamics as a possible means by which swards impacted N2O emission from the soils. However, a high N deposition might reduce the N2O mitigation potential of grasslands. [ABSTRACT FROM AUTHOR]