An underlying assumption of most soil carbon (C) dynamics models is that soil microbial communities are functionally similar; in other words, that microbial activity under given conditions is not dependent on the composition or diversity of the communities. Although a number of studies have indicated that microbial communities are not intrinsically functionally similar, most soil C dynamics models can adequately describe C dynamics without explicitly describing microbial functioning. Here, we provide a mechanistic basis for reconciling this apparent discrepancy. In a reciprocal transplant experiment, we show that the environmental context (soil and pore-network properties) of microbial communities can constrain the activity of functionally different communities to such an extent that their activities are indistinguishable. The data also suggest that when microbial activity is less constrained, the intrinsic functional differences among communities can be expressed. We conclude that soil C dynamics may depend on microbial community structure or diversity in environments where their activity is less constrained, such as the rhizosphere or the litter layer, but not in oligotrophic environments such as the mineral layers of soil.