The effects of a dry-rewetting event (D/RW) on soil microbial properties and nutrient release by leaching from two soils taken from adjacent grasslands with different histories of management intensity were studied. These were a low-productivity grassland, with no history of fertilizer application and a high-productivity grassland with a history of high fertilizer application, referred to as unimproved and improved grassland, respectively. The use of phospholipid fatty acid analysis (PLFA) revealed that the soil of the unimproved grassland had a significantly greater microbial biomass, and a greater abundance of fungi relative to bacteria than did the improved grassland. Soils from both grasslands were maintained at 55% water holding capacity (WHC) or dried to 10% WHC and rewetted to 55% WHC, and then sampled on days 1, 3, 9, 16, 30 and 50 after rewetting. The D/RW stress significantly reduced microbial biomass carbon (C), fungal PLFA and the ratio of fungal-to-bacterial PLFA in both soils. In contrast, D/RW increased microbial activity, but had no effect on total PLFA and bacterial PLFA in either soil. Microbial biomass nitrogen (N) was reduced significantly by D/RW in both soils, but especially in those of the improved grassland. In terms of nutrient leaching, the D/RW stress significantly increased concentrations of dissolved organic C and dissolved organic N in leachates taken from the improved soil only. This treatment increased the concentration of dissolved inorganic N in leachate of both soils, but this effect was most pronounced in the improved soil. Overall, our data show that D/RW stress leads to greater nutrient leaching from improved than from unimproved grassland soils, which have a greater microbial biomass and abundance of fungi relative to bacteria. This finding supports the notion that soils with more fungal-rich communities are better able to retain nutrients under D/RW than are their intensively managed counterparts with lower fungal to bacterial ratios, and that D/RW can enhance nutrient leaching with potential implications for water quality.