Shifting from ammonia removal to recovery is the current strategy in wastewater treatment management. We recently developed a microaerophilic activated sludge (MAS) system for retaining ammonia while removing organic carbon with minimal N2O emissions. A comprehensive understanding of nitrogen metabolisms in the MAS system is essential to optimize system performance. Here, we employed metagenomics and metatranscriptomics analyses to characterize the microbial community structure and activity during the transition from a microaerophilic to an aerobic condition. A hybrid approach of high-quality Illumina short reads and Nanopore long reads recovered medium- to high-quality 98 non-redundant metagenome-assembled genomes (MAGs) from the MAS communities. The suppressed bacterial ammonia monooxygenase (amoA) expression was upregulated after shifting from a microaerophilic to an aerobic condition. The 73 MAGs (>74% of the total) from 11 bacterial phyla harbored genes encoding proteins involved in nitrate respiration; 39 MAGs (~53%) carried N2O reductase (nosZ) genes with the predominance of clade II nosZ (31 MAGs), and 24 MAGs (~33%) possessed nitrite reductase (ammonia forming) genes (nrfA). Clade II nosZ and nrfA genes exhibited the highest and second-highest expressions among nitrogen metabolism genes, indicating robust N2O consumption and ammonification. Non-denitrifying clade II nosZ bacteria, Cloacibacterium spp., in the most abundant and active phylum Bacteroioda, were likely major N2O sinks. Elevated dissolved oxygen (DO) concentration inhibited clade II nosZ expression but not nrfA expression, potentially switching phenotypes from N2O reduction to ammonification. Collectively, the multi-omics analysis illuminated vital bacteria responsible for N2O reduction and ammonification in microaerophilic and aerobic conditions, facilitating high-performance ammonia recovery.