Nitrogen is essential for life. It is a major component of amino acids, the building blocks that make up proteins. Plants, the source of nitrogen for most other organisms, are unable to take in N₂ directly. Microorganisms in the soil must first convert atmospheric nitrogen into reactive forms of nitrogen such as NH₃, NO₂^- and NO₃^- through the process of nitrogen fixation and nitrification. Microbes can convert reactive forms of nitrogen back into N₂ through the process of denitrification. Nitrous oxide is produced as a by-product of the natural processes in the nitrogen cycle.

Source: Using the Wind to Fertilize Corn, Renewable Energy Newsletter, Agricultural Marketing Resource Center, February 2009.

Synthetic fertilizers add reactive nitrogen species to the soil and much of the excess nitrogen which is not used by plants undergoes denitrification, releasing N₂O as an intermediate in the process. Sewage treatment, landfills and industrial processes also emit N₂O, though much less than fertilization.

Fun Fact: N₂O is also known as laughing gas and is used as a weak general anesthetic in medicine!