Summary Microbial nitrate ammonification is a crucial process to retain nitrogen (N) in soils, thereby reducing N loss. Nitrate ammonification has been studied in enrichment and axenic bacterial cultures but so far has been merely ignored in environmental studies. In particular, the capability of arbuscular mycorrhizal fungi (AMF) to regulate nitrate ammonification has not yet been explored. Here, nitrate ion ( 15 NO 3 − ) was used to trace N transformations in hyphosphere and bulk soils. Metagenomic analysis was conducted, and cross‐kingdom interactions between AMF and an isolated nirBD ‐carrying Paenibacillus sp. strain DP01 from hyphosphere soil were investigated. AMF hyphae significantly increased ammonium ion (NH 4 + ) concentration and 15 NH 4 + derived from 15 NO 3 − in hyphosphere soil, which were 1.42 and 5.01 times as high as those in bulk soil. Metagenomic analysis showed that the nirB gene involved in nitrite reduction to ammonium was prevalent in hyphosphere and bulk soils. Hyphal exudates enhanced ammonification efficiency and biofilm formation of the nitrite‐ammonifying strain DP01. Additionally, accelerated oxygen depletion was detected on hyphal surface. This study demonstrates a novel interaction in which AMF significantly enhanced nitrate ammonification in the hyphosphere. Given the widespread presence of nitrate‐ammonifying microbes in soils, this newly described interkingdom interaction offers guidance for agricultural practices aimed at increasing N efficiency and environmental sustainability.