The capacity of soils to store organic carbon (SOC) is vital for agricultural productivity. Soil microorganisms exert a critical role in carbon (C) flow and potentially influence C balance through the decomposition of plant and microbial dead biomass. However, the connection between the microbial degradation potential of plant‐derived and microbial‐derived C and soil organic carbon sequestration (SOCSR) under organic and inorganic nitrogen (N) fertilization treatments remains largely unexplored using metagenomics. In this study, metagenomics was used to investigate the effects of 4 years inorganic (N1: 250 kg N ha−1 yr−1 and N3: 450 kg N ha−1 yr−1) and organic N (O1: N1 + 11,250 kg ha−1 yr−1 sheep manure and O3: N1 + 18,750 kg ha−1 yr−1 sheep manure) fertilizer application on plant biomass decomposition genes, microbial biomass decomposition genes, and microbial properties related to different sources of C decomposition (species composition and diversity). Furthermore, the study explored the relationship between organic matter decomposition genes, microorganisms, and SOCSR. The results revealed that compared with N1 treatment, the increased application of inorganic N fertilizer (N3) significantly enhanced the abundance of genes related to plant and microbial biomass decomposition and microbial diversity involved in SOC decomposition, resulting in reduced SOC content. Conversely, the increased application of organic N fertilizer (O1 and O3) had a minor effect on the abundance of genes related to different sources of C decomposition and C decomposing microbial diversity, but reduced microbial entropy (the ratio of microbial biomass carbon to SOC) and increased SOC content. The random forest model highlighted that plant biomass decomposition genes and bacterial community composition were important factors affecting SOCSR. The Mantel test also indicated that the genes involved in the decomposition of lignin, cellulose, and hemicellulose were closely related to SOCSR. These findings highlighted that increased inorganic N fertilizers greatly enhanced the microbial capacity for SOC decomposition, resulting in reduced SOC accumulation. While the increased application of organic N fertilizer increased SOC stability and reduced the mineralization potential of SOC, contributing to SOCSR. Overall, these findings provide a greater understanding of the relationship between soil C turnover and microbial C‐degrading potential under short‐term fertilization. And in a long time, they may have important implications for global strategies aimed at increasing SOCSR to restore fertility and facilitate sustainable agricultural development.