Urbanization is increasing worldwide and is regarded a major threat to biodiversity in forests. As consequences of intensive human use, the vegetation structure of naturally growing urban forests and their amount of deadwood can be reduced. Deadwood is an essential resource for various saproxylic insects and fungi. We assessed the effects of urbanization and forest characteristics on saproxylic insects and fungi. We exposed standardized bundles consisting of each three freshly cut beech and oak branches in 25 forests along a rural–urban gradient in Basel (Switzerland). After an exposure of 8 months, we extracted the saproxylic insects for 10 months using an emergence trap for each bundle. We used drilling chips from each branch to determine fungal operational taxonomic units (OTUs). In all, 193,534 insect individuals emerged from the experimental bundles. Our study showed that the abundance of total saproxylic insects, bark beetles, longhorn beetles, total flies, moths, and ichneumonid wasps decreased with increasing degree of urbanization, but not their species richness. However, the taxonomic composition of all insect groups combined was altered by wood moisture of branches and that of saproxylic beetles was influenced by the degree of urbanization. Unexpectedly, forest size and local forest characteristics had a minor effect on saproxylic insects. ITS (internal transcribed spacer of rDNA) analysis with fungal specific primers revealed a total of 97 fungal OTUs on the bundles. The number of total fungal OTUs decreased with increasing degree of urbanization and was affected by the volume of naturally occurring fine woody debris. The composition of fungal OTUs was altered by the degree of urbanization and pH of the branch wood. As a consequence of the altered compositions of saproxylics, the association between total saproxylic insects and fungi changed along the rural–urban gradient. Our study shows that urbanization can negatively impact saproxylic insects and fungi.