Nitrogen fixation rates associated with various substrates on a fringing reef at Eilat, Red Sea, were estimated by in situ acetylene reduction. High rates of acctylene reduction were associated with bare substrates, such as sand and dead coral skeletons. Low rates of acetylene reduction were associated with substrates covered by macroalgae or living coral tissue. Estimates of nitrogen fixation in various reef zones, based on these measurements, indicate that the sand-covered lagoon is responsible for more than 70% of the fixation in the reef. Consequently, the lagoon may serve as an important source of nitrogen for the coral reef community.