The incorporation of crop residues post-harvest can provide an important source of nitrogen (N) for the subsequent crop but can simultaneously lead to elevated nitrous oxide (N2O) emissions. The magnitude of N supply and corresponding N2O emissions strongly depends on the quality of the added crop residues, and soil and climatic conditions. However, little data is available for subtropical cotton systems. The primary aims of this study were to (i) quantify carbon dioxide (CO2) and N2O emissions, and corresponding emission factors (EFs) following cotton residue incorporation, and (ii) determine the contribution cotton residues have to soil N content for the subsequent crop. Using a semi-automated sampling system, CO2 and N2O emissions were monitored during a cotton fallow period following cotton residue incorporation under varying rainfall conditions compared to residue removal. The high C/N of the incorporated residues, low temperatures and the limited C substrate resulted in low N2O emissions. EFs were found to be 0.016 and 0.064% for average and high rainfall conditions, respectively which is significantly lower than the IPCC EF of 1%. The majority of decomposed residues were recovered in the soil of up to 68% with the remaining undecomposed and a very minimal amount was lost. There was a net mineralisation or loss/immobilisation observed across sites indicating soil conditions and management practices significantly influence N dynamics. The study suggests that the current IPCC methodology should be re-evaluated and that EFs need to be lowered to reflect the low N2O emissions from high C/N cotton residue N inputs. It also shows that effect of crop residues on soil N dynamics needs to be considered in N fertiliser management strategies in order to maximize the benefits from crop residue incorporation.