Cool‐season perennial grasslands are commonly used for livestock pasture. However, understanding of the belowground effects of forage defoliation (selective pressure applied by grazing) management is nascent. We investigated how defoliation management affects aboveground (forage productivity) and belowground processes (soil C/N), microbial nutrient cycling, and potential nitrous oxide [N2O] emissions). We hypothesized that rotational (moderate frequency) defoliation at low severity will increase soil organic matter (SOM) storage and microbial capacity to cycle C, N, and P, but that these changes would also lead to greater soil N2O emission potential. Data were collected from organically (OF) and conventionally managed (CF) farms with differing botanical composition in West Virginia, where three frequencies and two severities of forage defoliation were imposed. At OF, more severe defoliation decreased labile soil C content (–26%), while moderate defoliation resulted in a 39% reduction in microbial enzymatic capacity to cycle C, but not at CF. The N2O emission potential (ratio of nirK/nosZ functional gene abundance), was differentially affected by defoliation treatments at both sites. At OF, defoliation severity altered N2O emission potential, whereby low severity resulted in an 82% decrease in potential N2O emissions compared with high severity treatments. At CF, continuously defoliated plots exhibited a 71% lower N2O emission potential relative to less frequent defoliation. Belowground microbial parameters were more responsive to defoliation at OF, suggesting past management may influence how grazing management asserts belowground changes. Results suggest that defoliation management could enhance soil C storage, but potentially at the risk of increased N2O emissions.