Microorganisms have a variety of evolutionary adaptations and physiological acclimation mechanisms that allow them to survive and remain active in the face of environmental stress. Physiological responses to stress have costs at the organismal level that can result in altered ecosystem-level C, energy, and nutrient flows. These large-scale impacts result from direct effects on active microbes' physiology and by controlling the composition of the active microbial community. We first consider some general aspects of how microbes experience environmental stresses and how they respond to them. We then discuss the impacts of two important ecosystem-level stressors, drought and freezing, on microbial physiology and community composition. Even when microbial community response to stress is limited, the physiological costs imposed on soil microbes are large enough that they may cause large shifts in the allocation and fate of C and N. For example, for microbes to synthesize the osmolytes they need to survive a single drought episode they may consume up to 5% of total annual net primary production in grassland ecosystems, while acclimating to freezing conditions switches Arctic tundra soils from immobilizing N during the growing season to mineralizing it during the winter. We suggest that more effectively integrating microbial ecology into ecosystem ecology will require a more complete integration of microbial physiological ecology, population biology, and process ecology.