Effects of Nitrogen levels and addition of DMPP on the contents of NH4+-N and NO3–-N, microbial biomass carbon and microbial community functional diversity in red paddy soil were studied by cultivation experiments. The results showed that NH4+-N content decreased while NO3–-N content increased under different treatments during the 56 days culture period. As the N levels increased from 0 to 400 mg/kg, the average content of NH4+-N increased from 24.10 to 412.10 mg/kg and the average content of NO3–-N increased from 41.88 to 99.83 mg/kg. Addition of DMPP significantly inhibited nitrification and the inhibitory effect increased with the increasing nitrogen level. Under 400 mg/kg nitrogen treatment, soil nitrification ratio and soil nitrification rate decreased by 29% and 44.3% respectively when the DMPP was added, and the inhibitory effect was much better than other nitrogen treatments. N levels also affected soil microbial biomass carbon and microbial community functional diversity. As N levels increased from 0 to 400 mg/kg, soil microbial biomass carbon, AWCD and Shannon index decreased by 12.5%, 78.4% and 22.3% respectively. Soil microbial biomass, AWCD value and Shannon index increased by 2.1%, 23.9% and 7.8% respectively when DMPP was added and the effect was most significant especially under 400 mg/kg N treatment.