Phyllostachys praecox forest is one of the pivotal bamboo species for shoot cultivation in southern China. However, extensive mulching practices in Phyllostachys praecox forests have induced a non-flooding soil hypoxia situation, which may profoundly influence soil nitrogen transformation and utilization. Therefore, a simulated experiment was set up to explore the effect of soil hypoxia (oxygen content in 0%, 5%, 10%, and 20%) on nitrogen transformation, related enzyme and soil microbe. The study results indicated there was a pronounced impact of oxygen content on soil inorganic nitrogen levels. Under anoxic conditions with 0% and 5% oxygen levels, a significant decrease in soil NO3--N content was observed, accompanied by an increase in NH4+-N accumulation at the end of the incubation period. Urease (UR) activity was suppressed while nitrate reductase (NR) and nitrite reductase (NiR) activities were enhanced. Incubation under 0% oxygen conditions led to a notable reduction in soil microbial carbon (MBC) by 16.79% and microbial nitrogen (MBN) by 13.25% compared to non-anoxic settings. The diversity of the soil microbial community decreased with the decreasing oxygen level, although 5% oxygen content resulted in an enhanced microbial community diversity. Furthermore, although the dominant phylum and genus of the soil microbial community remained consistent across varying oxygen contents, there were significant differences in their relative abundance. Overall, this study illustrated that soil hypoxia in Phyllostachys praecox forest can induce alterations in soil nitrogen composition, enzyme activities, and microbial communities, which is not benefit for transformation and utilization, ultimately raising the risk of soil nitrogen loss. This scenario is detrimental to the growth and management of Phyllostachys praecox forests.