Recycling of essential nutrients occurs at scales from microbial communities to global biogeochemical cycles, often in association with ecological interactions in which two or more species utilise each others' metabolic by-products. However, recycling loops may be unstable; sequences of reactions leading to net recycling may be parasitised by side-reactions causing nutrient loss, while some reactions in any closed recycling loop are likely to be costly to participants. Here we examine the stability of nutrient recycling loops in an individual-based ecosystem model based on microbial functional types that differ in their metabolism. A supplied nutrient is utilised by a "source" functional type, generating a secondary nutrient that is subsequently used by two other types-a "mutualist" that regenerates the initial nutrient at a growth rate cost, and a "parasite" that produces a refractory waste product but does not incur any additional cost. The three functional types are distributed across a metacommunity in which separate patches are linked by a stochastic diffusive migration process. Regions of high mutualist abundance feature high levels of nutrient recycling and increased local population density leading to greater export of individuals, allowing the source-mutualist recycling loop to spread across the system. Individual-level selection favouring parasites is balanced by patch-level selection for high productivity, indirectly favouring mutualists due to the synergistic productivity benefits of the recycling loop they support. This suggests that multi-level selection may promote nutrient cycling and thereby help to explain the apparent ubiquity and stability of nutrient recycling in nature.