Introduction: Nitrogen fixation by microorganisms within biological soil crust ("biocrust") communities provides an important pathway for N inputs in cool desert environments where soil nutrients are low and symbiotic N-fixing plants may be rare. Estimates of N fixation in biocrusts often greatly exceed that of N accretion rates leading to uncertainty regarding N loss pathways. Methods: In this study we examined nitrogen fixation and denitrification rates in biocrust communities that differed in N fixation potential (low N fixation = light cyanobacterial biocrust, high N fixation = dark cyanolichen crust) at four temperature levels (10, 20, 30, 40°C) and four simulated rainfall levels (0.05, 0.2, 0.6, 1 cm rain events) under controlled laboratory conditions. Results: Acetylene reduction rates (AR, an index of N fixation activity) were over six-fold higher in dark crusts relative to light crusts. Dark biocrusts also exhibited eight-fold higher denitrification rates. There was no consistent effect of temperature on denitrification rates, but there was an interactive effect of water addition and crust type. In light crusts, denitrification rates increased with increasing water addition, whereas the highest denitrification rates in dark crusts were observed at the lowest level of water addition. Conclusions: These results suggest that there are no clear and consistent environmental controls on short-term denitrification rates in these biologically crusted soils. Taken together, estimates of denitrification from light and dark biocrusts constituted 3 and 4% of N fixation rates, respectively suggesting that losses as denitrification are not significant relative to N inputs via fixation. This estimate is based on a previously published conversion ratio of ethylene produced to N fixed that is low (0.295), resulting in high estimates of N fixation. If future N fixation studies in biologically crusted soils show that these ratios are closer to the theoretical 3:1 ratio, denitrification may constitute a more significant loss pathway relative to N fixed.