Abstract. The nitrification inhibitor dicyandiamide (DCD) has recently been shown to be effective in reducing nitrate leaching from grazed pasture soils. The objective of this study was to determine the influence of temperature and application rate on the effectiveness of DCD in nitrification inhibition. Possible effects on soil microbial biomass were also determined. The soil, Lismore silt loam (Pallic orthic brown soil; Udic Haplustept loamy skeletal), was incubated at a moisture content near field capacity under 2 temperatures (8 or 20°C). Urea was applied at 25 kg N/ha and dairy cow urine at 1000 kg N/ha. DCD was applied at 2 rates equivalent to 7.5 or 15 kg/ha. The results show that at a soil temperature of 8°C, the half-life of DCD was 111–116 days. The half-life of NH4+ changed from 44 days without DCD to 243–491 days when DCD was applied. In contrast, at a soil temperature of 20°C the half-life of DCD was 18–25 days. The half-life of NH4+ changed from 22 days without DCD to 64–55 days with DCD. The 2 different rates of DCD had a small effect on the NH4+ concentration in the soil. The application of DCD did not have a significant effect on soil microbial biomass. DCD would therefore be most effective in inhibiting nitrification and thus reducing nitrate leaching in late autumn–winter–early spring in most parts of New Zealand when daily average soil temperatures are generally below 10°C and when drainage is high.