Woody plant encroachment and proliferation in grasslands is occurring worldwide and has significant but variable effects on ecosystem processes, including primary production, litter decomposition, and N cycling. In mesic systems, recent reports suggest aboveground net primary production (ANPP) is stimulated by grass-to-woodland conversion; however, significant losses of soil C may accompany this land cover change in these environments. This study aimed to quantify how changes in plant production inputs (both above- and belowground), litter decomposition, and N cycling may feed back to reduce soil C pools in a mesic tallgrass prairie in central Texas, USA, that has undergone grass-to-woodland conversion over the past 60–70 y. Belowground net primary production (BNPP) in woodland was half that of adjacent grassland, and contrary to recent reports, no significant differences in ANPP between the two vegetation types were observed. Decomposition rates of aboveground woody and grass material were surprisingly similar. However, higher N concentrations in woodland leaves and stems meant woodland received more than 3× the amount of N via litterfall than adjacent grassland, and woody litter mineralized N when decomposing, while grassland litter tended to retain it. Losses of soil C accompanying grass-to-woodland conversion at this site (woodland soil C was 20% less than that of adjacent grassland) may be the result of both reduced BNPP inputs to the soil C pool and increased rates of N cycling stimulating soil organic matter decomposition. Given that the processes controlling whether grasslands accrue or lose C and N when they are replaced by woody species vary across time and depend on the species involved and the biotic and edaphic conditions and management history of the site, more complex models that incorporate these parameters may be required to understand and predict when gains and losses of C will accompany vegetation change.