Soil microbes play a central role in nutrient cycling, soil fertility, and ecosystem resilience. Understanding their responses to long-term human modification and forest restoration is therefore critical for sustaining ecosystem functions in dry Afromontane ecosystems. In sub-Saharan Africa, dry Afromontane forests (DAFs) have undergone centuries of land-use change, resulting in fragmented landscapes where Ethiopian Church Forests (CFs) persist as culturally protected refugia. In this study, we examined how contrasting land-use histories shape soil prokaryotic community composition, diversity, assembly processes, and functional potential across five habitat types in northwestern Ethiopia: CF, state forest (SF), community-managed forest (CMF), shrubland (SL), and cropland (CL). Using next-generation sequencing, we identified distinct differences in prokaryotic community structure across various habitats. Less disturbed habitats (CF and SF) were characterized by the dominance of Actinobacteriota and Crenarchaeota, whereas modified habitats supported more heterogeneous communities. Surprisingly, prokaryotic diversity was lower in CF and SF, suggesting strong environmental filtering under stable soil conditions and persistent native vegetation, which favor specialized, habitat-adapted taxa. Community turnover was primarily governed by deterministic processes (81%), with homogeneous selection dominating in CF (98.3%) and SF (97.3%), but weakening in CMF, SL, and CL, where mixed deterministic–stochastic assembly prevailed. Prokaryotic community composition was closely associated with soil properties, vegetation structure, and indicator tree species. Functionally, the relative abundance of ammonia-oxidizing and nitrifying prokaryotes was significantly higher in less disturbed forests and strongly associated with native trees such as Teclea nobilis and Albizia schimperiana, indicating a key role of tree species in structuring nitrogen-cycling communities. Overall, our results show that habitat degradation disrupts soil microbial community structure, assembly mechanisms, and nitrogen-cycling functions. In contrast, native and culturally protected forests maintain functionally coherent soil microbiomes. By linking microbial ecology with human-induced habitat modification and long-term conservation, this study highlights how human–nature relationships shape belowground communities and provides insights for dryland forest restoration strategies.