The harvester termite, Anacanthotermes ubachi Navas (Hodotermitidea) occurs throughout the desert regions of Israel. This species nests in subsurface galleries where dead plant material, the termite's main food source, and feces are stored. We measured potential net nitrogen (N) mineralization and nitrification and soil respiration in 7-day laboratory incubations of plant litter at different stages of termite processing, termite feces and termite gallery soil (carton) following wetting. Our objectives were (1) to characterize the amount of potential N release from termite-affected plant and soil materials, (2) to evaluate the potential for leaching of N from the galleries and (3) to make a preliminary evaluation of the importance of termites to the carbon (C) and N cycles of the Negev desert. Two distinct phases were seen in the dynamics of inorganic N during the 7 day incubations: (1) release of N following wetting and (2) immobilization of N from day 1 to day 7 of the incubation. The percent of inorganic N produced in 1 day that disappeared by day 7 was significantly higher in the surface and gallery litter in comparison to the feces and the carton. High levels of nitrate (NO3−: 87.5 g N kg−1) compared to ammonium (NH4+: 4.5 g N kg−1) release from the surface and gallery litter samples suggest that there is a potential for leaching of NO3− from the galleries to surrounding environments. Gallery litter, i.e. litter that had been processed by termites, released significantly less inorganic N and had a higher C:N ratio than surface litter that had not been affected by termite activity. These results suggest that termites actively remove N for their own nutrition, leaving behind litter of lower quality than was produced by plants. Comparison of the C:N ratios of litter and feces suggest that approximately 80% of the C and 65% of the N in the surface and the gallery litter was decomposed and released in the transformation to feces. Given mean annual biomass production in the study site (740 kg ha−1 with 296 kg C ha−1 and 6.6 kg N ha−1), this decomposition represents a release of 237 kg C ha−1 and 4.3 kg N ha−1, supporting the idea that termites function as keystone species in desert ecosystems.