Biological soil crusts play a crucial role in nitrogen cycling processes in the ecosystems of arid and semi-arid regions in Northwest China. Climate models predict that the northwestern region will experience significant changes in precipitation patterns in the future, and the nitrogen cycle is particularly sensitive to these changes. However, it remains unclear how increases or decreases in precipitation will affect nitrogen cycling processes in biological soil crusts. This study was conducted in the field observation area for ecological restoration of desert grasslands in Ningxia. A completely randomized single-factor experiment was set up to observe plots with increased and decreased precipitation. Using a metagenomic sequencing approach, we analyzed the response mechanisms of microbial community structure and functional gene diversity involved in the nitrogen cycle under three treatment conditions: natural precipitation (CK), 50% reduced precipitation (DW), and 50% increased precipitation (AW) to changes in precipitation levels. The results showed that the microbial community structure composition participating in nitrogen cycling in moss crust soils mainly includes the bacterial phyla Actinomycetota and Pseudomonadota, as well as the archaeal phyla Nitrososphaerota. The NMDS analysis results show that there are significant differences in the microbial groups involved in the nitrogen cycle in moss-crusted soils under different precipitation conditions, and there are also significant differences in the diversity of functional genes related to the nitrogen cycle. The relative abundance of the narB gene under AW conditions was significantly higher than in CK and DW, and the relative abundance of the nasB gene under AW conditions was significantly higher than in DW. The relative abundance of the nrfA gene under DW conditions was significantly lower than in CK, while the relative abundance of the pmoB/amoB gene under both DW and AW conditions was significantly higher than in CK. The PERMANOVA analysis results show that different precipitation treatments and soil organic matter (SOM) can explain 20.25% and 14.12% of the variation in the composition of nitrogen-cycling microbial genera, respectively, and 26.23% and 19.33% of the variation in the composition of nitrogen-cycling functional gene diversity, respectively. The nitrogen-cycling microbial processes in moss-crusted soils are significantly affected by precipitation levels. Under the future scenario of increased precipitation, the chemical properties of moss-crusted soils are capable of maintaining dynamic equilibrium, and the assimilatory nitrate reduction process will be enhanced. A future trend of decreasing precipitation may lead to an increase in NH4+-N content in moss-crusted soils, while also limiting the dissimilatory nitrate reduction process. Under both reduced and increased water conditions, the ammonia oxidation process will be enhanced. The variation in functional gene diversity of the moss-crusted soil microbiome in response to changes in precipitation indicates the adaptive adjustments of microorganisms in their nitrogen cycling functions.