The acetylene-reduction assay was used for in situ and laboratory assessment of biological nitrogen fixation in the acidic, waterlogged, muskeg ecosystem of the southern James Bay area, in the region of Moosonee, Ontario. In situ assays and subsequent laboratory experimentation revealed that nitrogenase activity was predominately a function of the activities of heterocystic blue-green bacteria associated with surface water, with the phyllosphere of mosses, and with at least one lichen, a species of Peltigera. No such in situ activity was detected in the subsurface organic material, even when such material was amended with glucose. However, under laboratory conditions at 20 degrees C, nitrogenase activity was evident in the subsurface layers after an extended lag and was shown to be higher under anaerobic than under aerobic conditions, to have an optimum temperature range extending about a mean of 20 degrees C, and to be stimulated by glucose. This potential for subsurface nitrogen fixation proved to be related to the presence of microorganisms existing in anaerobic microsites within the organic layers and no microorganisms capable of fixation could be detected under aerobic incubation.