We present a new decomposition model of C and N cycling in forest ecosystems that simulates N mineralisation from decomposing tree litter. It incorporates a mechanistic representation of the role of soil organisms in the N mineralisation-immobilisation turnover process during decomposition. We first calibrate the model using data from decomposition of 14C-labelled cellulose and lignin and 14C-labelled legume material and then calibrate and test it using mass loss and N loss data from decomposing Eucalyptus globulus residues. The model has been linked to the plant production submodel of the G'DAY ecosystem model, which previously used the CENTURY decomposition submodel for simulating C and N cycling. The key differences between this new decomposition model and the previous one, based on the CENTURY model, are: (1) growth of microbial biomass is the process that drives N mineralisation-immobilisation, and microbial succession is simulated; (2) decomposition of litter can be N-limited, depending on soil inorganic N availability relative to N requirements for microbial growth; (3) 'quality' of leaf and fine root litter is expressed in terms of biochemically measurable fractions; (4) the N:C ratio of microbial biomass active in decomposing litter is a function of litter quality and N availability; and (5) the N:C ratios of soil organic matter (SOM) pools are not prescribed but are instead simulated output variables defined by litter characteristics and soil inorganic N availability. With these modifications the model is able to provide reasonable estimates of both mass loss and N loss by decomposing E. globulus leaf and branch harvest residues in litterbag experiments. A sensitivity analysis of the decomposition model to selected parameters indicates that parameters regulating the stabilisation of organic C and N, as well as those describing incorporation of soil inorganic N in Young-SOM (biochemical immobilisation of N) are particularly critical for long-term applicatio