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Abstract Riparian zones are key ecotones that buffer aquatic ecosystems through removal of nitrogen (N) via processes such as denitrification. However, how dams alter riparian N cycling and buffering capacity is poorly understood. Here, we hypothesized that elevated groundwater and anoxia due to the backup of stream water above milldams may enhance denitrification. We assessed denitrification rates (using denitrification enzyme assays) and potential controlling factors in riparian sediments at various depths upstream and downstream of two relict U.S. mid‐Atlantic milldams. Denitrification was not significantly different between upstream and downstream, although was greater per river km upstream considering deeper and wider geometries. Further, denitrification typically occurred in hydrologically variable shallow sediments where nitrate‐N and organic matter were most concentrated. At depths below 1 m, both denitrification and nitrate‐N decreased while ammonium‐N concentrations substantially increased, indicating suppression of ammonium consumption or dissimilatory nitrate reduction to ammonium. These results suggest that denitrification occurs where dynamic groundwater levels result in higher rates of nitrification and mineralization, while another N process that produces ammonium‐N competes with denitrification for limited nitrate‐N at deeper, more stagnant/poorly mixed depths. Ultimately, while it is unclear whether relict milldams are sources of N, limited denitrification rates indicate that they are not always effective sinks; thus, milldam removal—especially accompanied by removal of ammonium‐N rich legacy sediments—may improve riparian N buffering.