The interaction of lake water (LW) and shallow groundwater (SGW) accelerates nitrogen (N) loss from the soil profile in the lakeshore cropland, and cropland buffer zone (CBZ) significantly inhibits N loss in this area. Here, characteristics of N loss and transformations driven by SGW and LW interactions were explored using microcosmic experiments, and N loss was estimated using in situ monitoring data before and after the construction of the CBZ along the west bank of Erhai Lake. The results indicated that NO₃⁻-N, dissolved organic N and total dissolved N sustained the main N losses in the soil, and the organic N was responsible for the main N loss in the effluent. The lower total nitrogen (TN) concentrations of SGW in this area, the greater the soil N loss. Moreover, N total loss from the 100 cm soil profile in the control check was 1.8 times that in the simulated SGW treatment. We found that nitrification, denitrification and anammox driven by the microbial community and N functional genes were the key processes leading to N loss. The effluent N (3.64%) and gaseous N (0.32%) loss ratios in the cropland for continuously growing vegetables (CGV) were much higher than that in the CBZ (1.07% of effluent N and 0.25% of gaseous N loss ratios). If a 100 m wide and 48 km long area of lakeshore cropland is CGV, an increase by 47% is projected by 2030 compared with the N loss in 2020. But this region was built as a 100 m wide CBZ or 50 m wide CBZ + 50 m wide CGV after 2019, N loss will be reduced by 87% and 44% in 2030 compared with the N loss in CGV. The results implied that restoring a suitable width of CBZ can significantly reduce N loss.