Warming may increase the extent and intensity of insect defoliations within Arctic ecosystems. A thorough understanding of the implications of this for litter decomposition is essential to make predictions of soil-atmosphere carbon (C) feedbacks. Soil nitrogen (N) and C cycles naturally are interlinked, but we lack a detailed understanding of how insect herbivores impact these cycles. In a laboratory microcosm study, we investigated the growth responses of heterotrophic soil fungi and bacteria as well as C and N mineralisation to simulated defoliator outbreaks (frass addition), long-term increased insect herbivory (litter addition at higher background N-level) and non-outbreak conditions (litter addition only) in soils from a Subarctic birch forest. Larger amounts of the added organic matter were mineralised in the outbreak simulations compared to a normal year; yet, the fungal and bacterial growth rates and biomass were not significantly different. In the simulation of long-term increased herbivory, less litter C was respired per unit mineralised N (C:N of mineralisation decreased to 20 ± 1 from 38 ± 3 for pure litter), which suggests a directed microbial mining for N-rich substrates. This was accompanied by higher fungal dominance relative to bacteria and lower total microbial biomass. In conclusion, while a higher fraction of foliar C will be respired by insects and microbes during outbreak years, predicted long-term increases in herbivory linked to climate change may facilitate soil C-accumulation, as less foliar C is respired per unit mineralised N. Further work elucidating animal-plant-soil interactions is needed to improve model predictions of C-sink capacity in high latitude forest ecosystems.