Despite its ecological importance, essential aspects of microbial N2O reduction—such as the effect of O2 availability on the N2O sink capacity of a community—remain unclear. We studied N2O vs. aerobic respiration in a chemostat culture to explore (i) the extent to which simultaneous respiration of N2O and O2 can occur, (ii) the mechanism governing the competition for N2O and O2, and (iii) how the N2O-reducing capacity of a community is affected by dynamic oxic/anoxic shifts such as those that may occur during nitrogen removal in wastewater treatment systems. Despite its prolonged growth and enrichment with N2O as the sole electron acceptor, the culture readily switched to aerobic respiration upon exposure to O2. When supplied simultaneously, N2O reduction to N2 was only detected when the O2 concentration was limiting the respiration rate. The biomass yields per electron accepted during growth on N2O are in agreement with our current knowledge of electron transport chain biochemistry in model denitrifiers like Paracoccus denitrificans. The culture’s affinity constant (KS) for O2 was found to be two orders of magnitude lower than the value for N2O, explaining the preferential use of O2 over N2O under most environmentally relevant conditions.Electronic supplementary materialThe online version of this article (10.1007/s00253-018-9247-3) contains supplementary material, which is available to authorized users.