We investigated microbial pathways of nitrogen transformation in highly permeable sediments from the German Bight (South-East North Sea) by incubating sediment cores percolated with 15N-labeled substrates under near in situ conditions. In incubations with added math formula, production of math formula occurred while the sediment was oxic, indicating ammonia oxidation. Similarly, math formula production during math formula incubations indicated nitrite oxidation. Taken together these findings provide direct evidence of high nitrification rates within German Bight sands. The production of 15N-N2 on addition of math formula revealed high denitrification rates within the sediment under oxic and anoxic conditions. Denitrification rates were strongly and positively correlated with oxygen consumption rates, suggesting that denitrification is controlled by organic matter availability. Nitrification and denitrification rates were of the same magnitude and the rapid production of 15N-N2 in incubations with added math formula confirmed close coupling of the two processes. Areal rates of N-transformation were estimated taking advective transport of substrates into account and integrating volumetric rates over modeled oxygen and nitrate penetration depths, these ranged between 22 μmol N m−2 h−1 and 94 μmol N m−2 h−1. Furthermore, results from the 15N-labeling experiments show that these subtidal permeable sediments are, in sharp contrast to common belief, a substantial source of N2O. Our combined results show that nitrification fuels denitrification by providing an additional source of nitrate, and as such masks true N-losses from these highly eutrophic sediments. Given the widespread occurrence of anthropogenically influenced permeable sediments, coupled benthic nitrification–denitrification might have an important but so far neglected role in N-loss from shelf sediments.