The effect of 10% azadirachtin granules (alcoholic extract of neem seed kernel mixed with China clay) was studied on the population of bacteria, actinomycetes, fungi, Azotobacter and nitrifying bacteria; soil dehydrogenase, phosphatase and respiratory activities on 0, 15th, 30th, 60th and 90th days after application in sandy loam soil collected from the fields. It was observed that baring the Azotobacter sp., azxadirachtin at all the doses exerted a suppressive effect on the rest of the microbial communities and enzyme activities in the intial 15 day period. The population of bacteria, actinomycetes besides phosphatse and respiratory activities recovered after 60th day and subsequently increased significantly. The fungi and nitrifiers were moset sensitive groups as their numbers were reduced significantly throughout the studies. The two times and five times recommended dose of azxadirachtin had very high biocidal effects on the soil microorganims and its activities. However, analysis of the data by the Shannon Weaver index showed that azadirachtin reduces both the form and functional microbial diversity at all doses. (c) 2006 Elsevier Ltd. All rights reserved.