The symbiotic heterocystous cyanobacteriumAnabaena azollae present in the leaf cavities of the water fernAzolla spp. was studied. The cyanobacteria extracted from the leaf cavities showed differences in pigment composition in three species ofAzolla, i.e A.pinnata var.pinnata, A.caroliniana and A.filiculoides, as observed by pigment absorption and epifluorescence tests. These differences suggest that of these species the cyanobiont ofA. pinnata is the most actively nitrogenfixing form. This has been confirmed by nitrogen fixation (acetylene reduction) tests. Heterocysts of the symbiont ofA. pinnata were characterized by high chlorophylla and low phycocyanin content, a low fluorescence yield of chlorophyll in the heterocysts compared to vegetative cells and a gradient of phycocyanin concentration in the vegetative cells adjacent to heterocysts. This indicates that only photosystem I is present in the heterocyst. In the two otherAzolla species quantitative shifts in the pigment composition occurred suggesting a lower nitrogen fixation activity. In the cyanobiontAnabaena azollae the heterocyst frequency could reach a value of 44–45%. It is argued that there are two generations of heterocysts in a matureAzolla plant, which are concomitant with two peaks of nitrogen fixation activity correlated with leaf age,i.e. leaf number along the main axis of the plant. At both peaks of maximal N2-ase activity, only 20–25% of the heterocysts present are metabolically active as demonstrated by the reduction of Neotetrazolium chloride (NTC) in the heterocysts and darkening of nuclear emulsions by silver salt reduction. Vegetative cells of the cyanobiont reduce Neotetrazolium chloride (NTC) to formazan more rapidly than has been observed in the free-living heterocystous cyanobacteriumAnabaena cylindrica tested in parallel experiments. This feature may be due to a more permeable cell wall of the vegetative cells of the cyanobiont compared to the free-living form, since the vegetative cells of the symbiont play a role in cross-feeding of the host (Azolla). Evidence is obtained that only the heterocysts of the cyanobiont ofAzolla are involved in the nitrogen fixation process as in free-living heterocystous cyanobacterium species. This situation is different from other cyanobacterial symbioses such as inGunnera, Blasia andAnthoceros, where physiological modifications are reported in the symbiosis with another photosynthetic partner such as the absence of O2 evolution and the absence of photo-fixation of CO2 in the cyanobionts. Pigment composition and N2-ase activity in the symbiotic cyanobacteria of three Azolla species have indicated the superiority of theA. pinnata symbiont.A. pinnata var.pinnata is a semidomesticated form used in S.E. Asia for agricultural purposes (irrigated rice culture) to increase soil fertility. It is suggested that by selection (domestication) more efficient strains (clones) can be obtained, and further that with more advanced techniques such as gene mutation and genetic manipulation even more efficient and for agriculture more beneficial clones can be obtained.