Nitrogen is an essential component in forest ecosystem nutrient cycling. Nitrogen fractions, such as dissolved nitrogen, ammonium, nitrate, and microbial biomass nitrogen, are sensitive indicators of soil nitrogen pools which affect soil fertility and nutrient cycling. However, the responses of nitrogen fractions in forest soils to organic mulching are less well understood. The rhizosphere is an important micro-region that must be considered to better understand element cycling between plants and the soil. A field investigation was carried out on the effect of mulching soil in a 15-year-old Ligustrum lucidum urban plantation. Changes in total nitrogen and nitrogen fractions in rhizosphere and bulk soil in the topsoil (upper 20 cm) and in the subsoil (20–40 cm) were evaluated following different levels of mulching, in addition to nitrogen contents in fine roots, leaves, and organic mulch. The relationships between nitrogen fractions and other measured variables were analysed. Organic mulching had no significant effect on most nitrogen fractions except for the rhizosphere microbial biomass nitrogen (MBN), and the thinnest (5 cm) mulching layer showed greater effects than other treatments. Rhizosphere MBN was more sensitive to mulching compared to bulk soil, and was more affected by soil environmental changes. Season and soil depth had more pronounced effects on nitrogen fractions than mulching. Total nitrogen and dissolved nitrogen were correlated to soil phosphorus, whereas other nitrogen fractions were strongly affected by soil physical properties (temperature, water content, bulk density). Mulching also decreased leaf nitrogen content, which was more related to soil nitrogen fractions (except for MBN) than nitrogen contents in either fine roots or organic mulch. Frequent applications of small quantities of organic mulch contribute to nitrogen transformation and utilization in urban forests.