Growing areas under transgenic crops have created a concern over their possible adverse impact on the soil ecosystem. This study evaluated the effect of Bt-cotton based cropping systems on soil microbial and biochemical activities and their functional relationships with active soil carbon pools in Vertisols of central India (Nagpur, Maharastra, during 2012–2013). Culturable groups of soil microflora, enzymatic activities and active pools of soil carbon were measured under different Bt-cotton based cropping systems (e.g. cotton-soybean, cotton-redgram, cotton-wheat, cotton-vegetables and cotton-fallow). Significantly higher counts of soil heterotrophs (5.7–7.9 log cfu g ⁻¹ soil), aerobic N-fixer (3.9–5.4 log cfu g ⁻¹ soil) and P-solubilizer (2.5−3.0 log cfu g ⁻¹ soil) were recorded in Bt-cotton soils. Similarly, soil enzymatic activities, viz. dehydrogenase (16.6–22.67 µg TPF g ⁻¹  h ⁻¹ ), alkaline phosphatase (240–253 µg PNP g ⁻¹  h ⁻¹ ) and fluorescein di-acetate hydrolysis (14.6–18.0 µg fluorescein g ⁻¹  h ⁻¹ ), were significantly higher under Bt-cotton-soybean system than other Bt- and non-Bt-cotton based systems in all crop growth stages. The growth stage-wise order of soil microbiological activities were: boll development > harvest > vegetative stage. Significant correlations were observed between microbiological activities and active carbon pools in the rhizosphere soil. The findings indicated no adverse effect of Bt-cotton on soil biological properties.