Oat (Avena nuda L.) is a nutritious grain crop, rich in dietary fibers and phytochemicals. Application of efficient nitrogen (N) sources and dose is very important to obtain higher crop productivity and to achieve environmental sustainability. The exploitation of natural beneficial microbes and organic nitrogen in combination with chemical nitrogen would be effective to boost soil N for plant uptake. Hence, a field experiment was conducted during 2016 and 2017 with the aim to ameliorate the use of chemical N (CN) with organic nitrogen (ON) and microbial fertilizer (MBF) without compromising the productivity of oat. T1 = control, T2 = 100% CN, T3 = 100% CN+MBF, T4 = 75% CN+ 25% ON+MBF, T5 = 50% CN+ 50% ON+MBF, T6 = 100% ON+MBF, T7 = 100% ON were the treatments. 50% CN + 50% ON + MBF treatment proved to be an efficient combination regarding enhanced biomass and grain yield, nitrogen uptake and NUE as compared to rest of the treatments in both years. During the critical stages of the crop, when most of the applied CN was leached from the top 20 cm soil depth, a substantial N came from the PM mineralization through enhanced microbial activity by the addition of MBF. Lastly, the application of ON supplemented with MBF improved the rhizosphere soil properties, i.e. mineral N concentration, total N (TN), soil organic carbon (SOC), microbial biomass carbon (MBC), microbial biomass nitrogen (MBN), soil respiration rate and enzymatic activity. A balanced and source conscious application of CN, ON and MBF reduced N losses and added a substantial amount of N into the soil N pool. We concluded that organic N combined with chemical N and MBF proved to be effective in improving soil properties ensuring less N loss and increasing oat production in the semi-arid region.