Drying and rewetting of soil can have large effects on carbon (C) and nitrogen (N) dynamics. Drying-rewetting effects have mostly been studied in the absence of plants, although it is well known that plant–microbe interactions can substantially alter soil C and N dynamics. We investigated for the first time how drying and rewetting affected rhizodeposition, its utilization by microbes, and its stabilization into soil (C associated with soil mineral phase). We also investigated how drying and rewetting influenced N mineralization and loss. We grew wheat (Triticum aestivum) in a controlled environment under constant moisture and under dry-rewetting cycles, and used a continuous 13C-labeling method to partition plant and soil organic matter (SOM) contribution to different soil pools. We applied a 15N label to the soil to determine N loss. We found that dry-rewetting decreased total input of plant C in microbial biomass (MB) and in the soil mineral phase, mainly due to a reduction of plant biomass. Plant derived C in MB and in the soil mineral phase were positively correlated (R2 = 0.54; P = 0.0012). N loss was reduced with dry rewetting cycles, and mineralization increased after each rewetting event. Overall drying and rewetting reduced rhizodeposition and stabilization of new C, primary through biomass reduction. However, frequency of rewetting and intensity of drought may determine the fate of C in MB and consequently into the soil mineral phase. Frequency and intensity may also be crucial in stimulating N mineralization and reducing N loss in agricultural soils.