Fast-growing bacteria and fungi are expected to cause the initial stage of decomposition of woody fragments in and on soils, i.e. the respiration of sugars, organic acids, pectin and easily accessible cellulose and hemi-cellulose. However, little is known about the factors regulating initial wood decomposition. We examined the effect of wood fragment size, vertical position, nitrogen addition and soil origin on initial wood decay and on the relative importance of fungi and bacteria therein. Two fractions of birch wood were used in microcosm experiments, namely wood blocks (dimensions: 3 × 0.5 × 0.5 cm) and sawdust (dimensions: 0.5–2 mm). The woody fragments were enclosed in nylon bags and placed on top of- or buried in an abandoned arable soil and in a heathland soil. After 15, 25 and 40 weeks of incubation, fungal biomass was quantified (as ergosterol and chitin content) and bacterial numbers were determined. The results indicated that initial wood decay was mostly caused by fungi; bacteria were only contributing in sawdust in/on abandoned arable soil. Larger fragment size, burial of fragments and nitrogen addition positively influenced fungal biomass and activity. Fungal biomass and decay activities were much lower in woody fragments incubated in/on heathland soil than in those incubated in/on abandoned arable soil, indicating that soil origin is also an important factor determining initial wood decay.