Soils are a mosaic of dynamic microenvironments that differ in physical, biological, and chemical properties. Hence, the microbial communities that govern ecosystem C and N cycling are spatially and temporally variable. Here, we synthesize our current understanding of how the formation of microenvironments within the soil matrix influences biological activity, defines the spatial and temporal dynamics of soil biota, and, subsequently, determines ecosystem functioning. Recently, it has been observed that both fungi and earthworms, which have been known to enhance the formation of soil aggregates, directly control the formation of microaggregates (within macroaggregates). In addition, several studies have indicated that the microaggregate structure creates an operationally definable microenvironment for microorganisms, i.e. the differences in microbial community are greater between macroaggregates and microaggregates within a soil type than among different soil types. This microenvironment is characterized by low predation pressure, relatively stable water potential, low oxygen availability, and low accessibility for exogenous toxic elements. As a result, the spatial compartmentalization associated with these microenvironments protects microbes versus contaminants, fosters a unique microbial community structure, but also reduces the activity level of the microflora. The latter function of microaggregates directly induces the stabilization and storage of soil C and N. It has been shown that C and especially C derived from fungal and bacterial cell wall components are preferentially sequestered within microaggregates occluded within macroaggregates. Rhizosphere dynamics also contribute to the structural organization of the soil, either directly by binding soil particles into stable aggregates or indirectly by providing the source of energy that drives microbial activity and the production of aggregate stabilizing materials. It has been shown that rhizosphere-associated processes create unique microenvironments for soil microorganisms. Moreover, ongoing root exudation and sloughing has been shown to maintain a more diverse microbial community, with a more diverse substrate use profile than the microbial communities found in the bulk soil. The interactions between soil structural components and microbial activities have demonstrated seasonal fluctuations, which can impact microbial-mediated processes (e.g., C and N stabilization versus loss). While advances have been made to better understand the relationship between the biological and physical components of the soil system, connecting this interaction to ecosystem functioning (e.g., C and N cycling) is still elusive. I suggest that progress can be made in this research area by investigating 1) the structural dynamics of microenvironments, as defined by the rhizosphere and microaggregate structure, 2) the microbial communities associated with the C and N cycling within these microenvironments, and 3) the effects of temporal variation on the relationship between soil biota, soil structure, and nutrient dynamics.