Soil degradation threatens agricultural sustainability in Ethiopia, necessitating evidence‐based fertilization strategies to maintain productivity. This study systematically evaluated the effects of organic and inorganic fertilizer application rates on microbial biomass and soil nutrient dynamics in maize‐based systems at Wondo Genet, Ethiopia. Using a randomized complete block design, two fertilizer types (organic and inorganic) were applied at three rates each, alongside control treatments. Soil samples were collected from two depths (0–10 and 10–20 cm) and analyzed for microbial biomass carbon and nitrogen (MBC–MBN), and key soil nutrients. Results demonstrated that both fertilizer types significantly improved microbial biomass and soil nutrients compared to controls (
p
< 0.05). Application rates significantly influenced microbial responses, with optimal rates of 750 g/m
2
for organic amendments and 4.9 g/m
2
for inorganic fertilizers. Soil organic carbon peaked at 750 g/m
2
organic application, while available K, P, and total N were maximized at 1250 g/m
2
under organic fertilization. For inorganic fertilizers, optimal nutrient concentrations were achieved at the intermediate rate of 6.9 g/m
2
. Soil depth significantly affected microbial biomass distribution, with consistently higher values in topsoil, while soil nutrients showed no significant depth‐related differences. Correlation analysis revealed strong positive relationships between MBC–MBN and between soil organic carbon and total nitrogen (SOC–TN). These findings demonstrate that fertilizer application rates critically affect soil microbial biomass and nutrient availability, indicating substantial potential for improving soil fertility and agricultural sustainability. The results support rate‐dependent soil management strategies to restore soil health and enhance crop production in the Ethiopian Rift Valley and similar vulnerable agroecosystems.