The use of microbial fuel cells (MFC) in the field of electricity generation and wastewater treatment is attracting considerable research attention. Nitrate removal relies on nitrification and denitrification in the cathode. Dissolved oxygen (DO) is an important factor influencing MFC. In this work, the performance of a two-chambered MFC that uses nitrogen wastewater as a substrate was investigated under three different initial catholyte DO microenvironments anoxic (1.5 mg/L), normal-value (3.4 mg/L), and oxygen-rich (4.4 mg/L) conditions. Results indicated that MFC performance depended on the initial DO concentration of the cathode. Power density was the highest under anoxic condition. Furthermore, high-throughput sequencing was used to explore the cathode biofilm and microbial-communities suspension in each stage. Results showed that the predominant genus of cathode electrodes changed from Pirellula to Thermomonas and finally to Azospira. Heterotrophic denitrifying bacterial activity was inhibited under anoxic condition, and the proportion of nitrobacteria increased. Overall, this study showed that MFC can be used for simultaneous power generation and decomposed-nitrogen treatment by controlling the catholyte DO and improving the reduction efficiency of the cathode.