Abstract: Straw incorporation to soil is an effective way to utilize plant straw resource. It improves soil fertility and regulates soil microbial community structure and diversity. Despite this, there are few reports on the effect of different straw incorporation modes on soil fertility and microbial diversity in sandy soils in Xinjiang. Field trials were conducted with direct straw incorporation (NPKS), abdomen-digested straw incorporation (sheep manure application, NPKM, 15.0 thm2) and carbonized straw incorporation (biochar application, NPKB1, 2.5 thm2 and NPKB2, 15.0 thm2) to the field to evaluate the effects of different straw incorporation modes on soil nutrient, microbial quantity, enzyme activity and microbial carbon utilization in sandy soils in southern Xinjiang during the period of 2010–2012. The results showed that: 1) Compare with the control (chemical fertilization, NPK) treatment, different straw incorporation modes significantly improved soil nutrient of sandy soils. NPKM treatment was the best, followed by NPKB2 treatment, NPKS treatment and then NPKB1 treatment. 2) Different straw incorporation modes had considerable effect on soil microbial population. The treatments increased the populations of soil bacteria and actinomycete and the number of physiological groups of bacterial. Compared with NPK treatment, the population of bacteria was highest under NPKB2 treatment while the population of actinomycete was highest under NPKM treatment; increasing significantly by 413.16% and 574.19%, respectively. The number of physiological groups of bacterial under NPKB1 and NPKB2 treatments was higher than that under NPKS treatment. Soil enzymes activities of different straw incorporation modes were generally higher than that under NPK treatment, and NPKM treatment had the best effect on soil enzymes activities. 3) Biolog carbon resources utilization analysis showed that different straw incorporation modes improved soil microbial activity and richness index. Principal component analysis showed that obvious differences in soil microbial community among different straw incorporation modes. The differences in carbon resources utilization were mostly caused by carboxylic acids and carbohydrates. Cluster analysis showed that between NPKB2 and NPKM, and between NPKB1 and NPKS had similar microbial functions. The results indicated that different straw incorporation modes significantly improved soil microbial activity and functional diversity in sandy soils. However, the effect of soil improvement was different for different modes. The 3-years (2010–2012) experimental results suggested that abdomen-digested straw incorporation and carbonized straw incorporation to the field had better effects, while direct straw incorporation to the field increased the risk of soil borne diseases. The results added to the existing theoretical guidance on establishing modern eco-efficient fertilization modes in sandy soils in southern Xinjiang.