Efficient nutrient recycling underpins the ecological success of cnidarian-algal symbioses in oligotrophic waters. In these symbioses, nitrogen limitation restricts the growth of algal endosymbionts in hospite and stimulates their release of photosynthates to the cnidarian host. However, the mechanisms controlling nitrogen availability and their role in symbiosis regulation remain poorly understood. Here, we studied the metabolic regulation of symbiotic nitrogen cycling in the sea anemone Aiptasia by experimentally altering labile carbon availability in a series of experiments. Combining 13C and 15N stable isotope labeling experiments with physiological analyses and NanoSIMS imaging, we show that the competition for environmental ammonium between the host and its algal symbionts is regulated by labile carbon availability. Light regimes optimal for algal photosynthesis increase carbon availability in the holobiont and stimulate nitrogen assimilation in the host metabolism. Consequently, algal symbiont densities are lowest under optimal environmental conditions and increase toward the lower and upper light tolerance limits of the symbiosis. This metabolic regulation promotes efficient carbon recycling in a stable symbiosis across a wide range of environmental conditions. Yet, the dependence on resource competition may favor parasitic interactions, explaining the instability of the cnidarian-algal symbiosis as environmental conditions in the Anthropocene shift towards its tolerance limits.