1. Leaf litter decomposition is a key process for nutrient cycling with broad ecosystem-level consequences. However, we still cannot explain an important amount of the observed variability in decomposition rates. Therefore, a mechanistic model of how litter quality impacts the metabolic capacity of microbial decomposers to degrade litter at a given rate could improve our understanding of litter decomposition. 2. Elemental imbalances between leaf litter and microbial decomposers can lead to nutrient-limited decomposition. Microbial decomposers can deal with elemental imbalances via three main physiological mechanisms; by adjusting their carbon use efficiency (i.e., the proportion of assimilated carbon that is not respired), accumulating nitrogen, or adjusting extracellular enzyme allocation between carbon (C) and nitrogen (N). Therefore, decomposer communities that adjust to elemental imbalances using these strategies should decompose litter faster than those unable to adjust. 3. In this study, in a reciprocal transplant microcosm, we experimentally evaluated whether differences in the capacity of decomposers to reduce elemental imbalances help explain variability in decomposition rates. We used litter and soils from three co-existing woody species with contrasting litter C:N. Throughout the decomposition experiment, we quantified litter biomass loss, the allocation to β-1,4-glucosidase and β-N-acetylglucosaminidase (i.e., C and N degrading enzymes), and N accumulation. These data allowed us to identify the main strategies through which decomposers deal with elemental imbalances and their concomitant effects on litter decomposition rates. 4. Our results confirm that litter decomposition rates are strongly controlled by litter quality, but differences in decay rates are a function of C and N demands of decomposers. Here, decomposers dealt with elemental imbalances mainly through N accumulation and, to a lesser extent, through extracellular enzyme allocation and lower carbon use efficiency. However, when enzymatic allocation and N accumulation were insufficient to reduce elemental imbalances, decomposition rates were slower, irrespective of litter quality. Finally, we show that the effectiveness of physiological strategies used by decomposers to reduce elemental imbalances will affect decomposition rates, a key ecosystem process.