Coastal environments are nitrogen (N) removal hot spots, which regulate the amount of land-derived N reaching the open sea. However, mixing between freshwater and seawater creates gradients of inorganic N and bioavailable organic matter, which affect N cycling. In this study, we compare nitrate reduction processes between estuary and offshore archipelago environments in the coastal Baltic Sea. Denitrification rates were similar in both environments, despite lower nitrate and carbon concentrations in the offshore archipelago. However, DNRA (dissimilatory nitrate reduction to ammonium) rates were higher at the offshore archipelago stations, with a higher proportion of autochthonous carbon. The production rate and concentrations of the greenhouse gas nitrous oxide (N2O) were higher in the estuary, where nitrate concentrations and allochthonous carbon inputs are higher. These results indicate that the ratio between nitrate and autochthonous organic carbon governs the balance between N-removing denitrification and N-recycling DNRA, as well as the end-product of denitrification. As a result, a significant amount of the N removed in the estuary is released as N2O, while the offshore archipelago areas are characterized by efficient internal recycling of N. Our results challenge the current understanding of the role of these regions as filters of land-to-sea transfer of N.