Arbuscular mycorrhizal fungi (AMF) can enhance plant nutrition and growth. However, their contribution to nutrient cycling in ecosystems is still poorly understood. Using experimental grassland microcosms filled with two different soil types (pasture and heath soil) and fertilized with different N forms (NO3− or NH4+), we tested the AMF contribution to N and P cycling including measurements of organic and inorganic leaching losses and N2O fluxes. We hypothesized that AMF enhance the sustainability of plant-soil systems by reducing nutrient losses and enhancing plant nutrient uptake. AMF reduced reactive and unreactive P leaching by 31%, enhanced plant P contents by 15% and increased P mobilization from soil by 18%. AMF reduced N2O fluxes and NH4+ leaching in both soils. Leaching of dissolved organic N was reduced by 24% in the heath soil only. Plant N contents were increased by 13% in the pasture soil but not affected in the heath soil. The microbial biomass N content was higher with AMF. This is the first comprehensive assessment of the influence of AMF on N and P cycling, including effects on inorganic and organic nutrient leaching losses and N2O emissions in a single study. We conclude that AMF can promote sustainable nutrient cycling but the effects on N cycling are context dependent.