Anthropogenic nitrogen (N) deposition causes shifts in vegetation types as well as species composition of arbuscular mycorrhizal (AM) fungi and other soil microorganisms. A greenhouse experiment was done to determine whether there are feedbacks between N-altered soil inoculum and growth of a dominant native shrub and an invasive grass species in southern California. The region is experiencing large-scale loss of Artemisia californica shrublands and replacement by invasive annual grasses under N deposition. Artemisia californica and Bromus madritensis ssp. rubens were grown with soil inoculum from experimental plots in a low N deposition site that had (1) N-fertilized and (2) unfertilized soil used for inoculum, as well as (3) high-N soil inoculum from a site exposed to atmospheric N deposition for four decades. All treatments plus a nonmycorrhizal control were given two levels of N fertilizer solution. A. californica biomass was reduced by each of the three inocula compared to uninoculated controls under at least one of the two N fertilizer solutions. The inoculum from the N-deposition site caused the greatest growth depressions. By contrast, B. madritensis biomass increased with each of the three inocula under at least one, or both, of the N solutions. The different growth responses of the two plant species may be related to the types of AM fungal colonization. B. madritensis was mainly colonized by a fine mycorrhizal endophyte, while A. californica had primarily coarse endophytes. Furthermore, A. californica had a high level of septate, nonmycorrhizal root endophytes, while B. madritensis overall had low levels of these endophytes. The negative biomass response of A. californica seedlings to high N-deposition inoculum may in part explain its decline; a microbially-mediated negative feedback may occur in this system that causes poor seedling growth and establishment of A. californica in sites subject to N deposition and B. madritensis invasion.