Nitrogenase (EC 1.7.99.2) activity (acetylene reduction) and nitrogen fixation ((15)N(2) fixation) were measured in cyanobacteria freshly isolated from the coralloid roots of Macrozamia riedlei (Fisch. ex Gaud.) Gardn. Light and gas phase oxygen concentration had marked interactive effects on activity, with higher (up to 100-fold) rates of acetylene reduction and (15)N(2) fixation in light. The relationship between ethylene formation and N(2)-fixation varied in the freshly isolated cyanobacteria from 4 to 7 nanomoles of C(2)H(4) per nanomole (15)N(2). Intact coralloid roots, incubated in darkness and ambient air, showed a value of 4.3. Maximum rates of nitrogenase activity occurred at about 0.6% O(2) in light, while in darkness there was a broad optimum around 5 to 8% O(2). Inhibition of nitrogenase, in light, by pO(2) above 0.6% was irreversible. Measurements of light-dependent O(2) evolution and (14)CO(2) fixation indicated negligible photosynthetic electron transport involving photosystem II and, on the basis of inhibitor studies, the stimulatory effect of light was attributed to cyclic photophos-phorylation. Nitrogenase activity of free-living culture of an isolate from Macrozamia (Nostoc PCC 73102) was only slightly inhibited by O(2) levels above 6% O(2) and the inhibition was reversible. These cells showed rates of light-dependent O(2) evolution and (14)CO(2) fixation which were 100- to 200-fold higher than those by the freshly isolated symbiont. Furthermore, nitrogenase activity was dependent on both photosynthetic electron transport and photophosphorylation. These data indicate that cyanobacteria within cycad coralloid roots are differentiated specifically for symbiotic functioning in a microaerobic environment. Specializations include a high heterocyst frequency, enhanced permeability to O(2), and a direct dependence on the cycad for substrates to support nitrogenase activity.