Woody plant proliferation in grasslands and savannas has been documented worldwide in recent history. To better understand the consequences of this vegetation change for the C-cycle, we measured soil microbial biomass carbon (C
mic) in remnant grasslands (time 0) and woody plant stands ranging in age from 10 to 130 years in a subtropical ecosystem undergoing succession from grassland to woodlands dominated by N-fixing trees. We also determined the ratio of SMB-C to soil organic carbon (C
mic/C
org) as an indicator of soil organic matter quality or availability, and the metabolic quotient (
qCO
2) as a measure of microbial efficiency. Soil organic carbon (C
org) and soil total nitrogen (STN) increased up to 200 % in the 0–15 cm depth increment following woody plant
invasion of grassland, but changed little at 15–30 cm. C
mic at 0–15 cm increased linearly with time following woody plant encroachment and ranged from 400 mg C kg
−1 soil in remnant grasslands up to 600–1000 mg C kg
−1 soil in older (>60 years) woody plant stands. C
mic at 15–30 cm also increased linearly with time, ranging from 100 mg C kg
−1 soil in remnant grasslands to 400–700 mg C kg
−1 soil in older wooded areas. These changes in C
mic in wooded areas were correlated with concurrent changes in stores of C and N in soils, roots, and litter. The C
mic/C
org ratio at 0–15 cm decreased with increasing woody plant stand age from 6 % in grasslands to <4 % in older woodlands suggesting that woody litter may be less suitable as a microbial substrate compared with grassland litter. In addition, higher
qCO
2 values in woodlands (
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0.8 mg CO
2-C g
−1 C
mic h
−1) relative to remnant grasslands (0.4 mg CO
2-C g
−1 C
mic h
−1) indicated that more respiration was required per unit of C
mic in wooded areas than in grasslands. Observed increases in C
org and STN following woody plant encroachment in this ecosystem may be a function of both greater inputs of poor quality C that is relatively resistant to decay, and the decreased ability of soil microbes to decompose this organic matter. We suggest that increases in the size and activity of C
mic following woody plant encroachment may result in: (a) alterations in competitive interactions and successional processes due to changes in nutrient dynamics, (b) enhanced formation and maintenance of soil physical structures that promote C
org sequestration, and/or (c) increased trace gas fluxes that have the potential to influence atmospheric chemistry and the climate system at regional to global scales.