Utilisation of microalgae to extract nutrients from the effluent of anaerobic digestion of food waste is an emerging technology. A by-product of this process is the microalgal biomass which has potential to be used as an organic bio-fertilizer. However, microalgal biomass are rapidly mineralized when applied to soil which may result in N loss. One solution is to emulsify microalgal biomass with lauric acid (LA) to delay the release of mineral N. This study aimed to investigate whether combining LA with microalgae to develop a new fertilizer product with a controlled release function of mineral N when applied to soil, and any potential impacts the bacterial community structure and activity. The treatments were applied to soil emulsified with LA and were combined with either microalgae or urea at rates of 0%, 12.5%, 25% and 50% LA, untreated microalgae or urea and unamended control were incubated at 25 °C and 40% water holding capacity for 28 days. Quantification of soil chemistry (NH4+-N, NO3−-N, pH and EC), microbial biomass carbon, CO2 production and bacterial diversity were characterised at 0, 1, 3, 7, 14 and 28 days. The NH4+-N and NO3−-N concentration decreased with increasing rate of LA combined microalgae indicating that both N mineralization and nitrification were impacted. As a function of time, NH4+-N concentration increased up to 7 days for the microalgae at lower rates of LA, and then slowly decreased for 14 and 28 days, with an inverse relationship with soil NO3−N. Aligning with soil chemistry, an observed decrease in the predicted nitrification genes amoA·amoB and relative abundance of ammonia oxidizing bacteria (Nitrosomonadaceae) and nitrifying bacteria (Nitrospiraceae) with an increasing rate of LA with microalgae provides further support for possible inhibition of nitrification. The MBC and CO2 production was higher in the soil amended with increasing rates of LA combined microalgae and there was an increase in the relative abundance of fast-growing heterotrophs. Treating microalgae by emulsification with LA has the potential to control the release of N by increasing immobilization over nitrification and therefore it might be possible to engineer microalgae to match plant nutrient growth requirements whilst recovering waste from waste resources.