Abstract The soil seed bank is a hidden community below‐ground and a crucial component of plant biodiversity. Nitrogen (N) enrichment can reduce plant species diversity both in above‐ground plant communities and seed banks. However, the mechanisms by which N enrichment affects soil seed banks are not clear. We investigated the direct and indirect mechanisms of N enrichment in soil seed banks in an N addition experiment in an alpine meadow on the eastern Tibetan Plateau. We combined above‐ground plant community and litter data, fungal diversity, seed bank surveys and seed rain monitoring, and conducted a seed burial experiment to explore seed viability. We found that the rate of loss of species diversity was slower in seed banks than in above‐ground plant communities. N enrichment directly affected seed banks by decreasing seed viability and enhancing seed germination. Furthermore, small seeds were more prone to loss of viability and increased seed germination under N enrichment than large seeds. At the same time, N enrichment also indirectly decreased seed bank species richness and number of seeds by altering the composition of the plant community and by increasing the amount of litter and fungal diversity. N enrichment also indirectly decreased number of seeds in seed banks through decreasing number of seeds of seed rain, with increasing negative effects due to higher levels of N enrichment. Synthesis . Our results provide novel insights into multiple direct and indirect mechanisms that can lead to loss of plant diversity in seed banks under N enrichment, with important ramifications on the maintenance of plant biodiversity, ecosystem resilience and restoration in N‐enriched systems.