The nitrogen balance of a shallow water eelgrass Zostera marina L. bed was assessed in April and August 1995 by quantifying pools of nitrogen in plants and sediment and by measuring rates of nitrogen inputs and losses in vegetated and bare sediments. The total pool of nitrogen in the vegetated sediment doubled from April to August. The exchange of inorganic nitrogen between water column and sediment was measured in benthic flux chambers, and showed that vegetated sediment was a sink for water column nitrogen in both April and August. Net nitrogen fluxes of NO3- and NH4+ were controlled mainly by light dependent nitrogen uptake in eelgrass leaves, which accounted for 60% of the estimated nitrogen requirements for plant growth. Nitrogen fixation was stimulated by eelgrass photosynthesis, but contributed less than 4% to total nitrogen input. The nitrogen mass balance suggested a large import of particulate nitrogen in addition to net uptake of inorganic nitrogen. Nitrogen was lost from the vegetated sediment mainly via export of leaves. Rates of denitrification measured with in situ techniques were low compared to the activity in bare sediments of similar areas. Increased denitrification was found in the eelgrass rhizosphere in April, but the overall denitrification activity within the bed barely balanced nitrogen fixation. The study shows that eelgrass vegetated sediments may influence the nitrogen cycling of shallow waters substantially by incorporating large pools of nitrogen into slowly degradable material, making nitrogen at least temporally unavailable to phytoplankton and ephemeral macroalgae. The results also suggest that neither nitrogen fixation nor denitrification plays a major role in the nitrogen dynamics of eelgrass beds.