Ceanothus greggii var. perplexans is a common shrub in the southern California chaparral. Clusters of nodules found under the canopy of this species are modified roots which contain a nitrogen-fixing endophyte, Frankia ceanothi (Actinomycetales), within the cortex. The nodule density per m2 obtained from root system excavations is much lower than that reported for different Ceanothus species in northern California. Field observations indicate that soil moisture is an important factor in nodule formation. Anatomical studies with the scanning electron microscope and acetylene reduction assays support the hypothesis that the vesicles, spherical swellings of hyphal endings (1.2–3.0 μm in diam), are indeed the sites of N2 fixation. No bacteria-like bodies were found. The acetylene reduction rates of C. greggii endophytes were of the same order of magnitude as those reported for other members of the genus Frankia. It is estimated that 100 grams of nitrogen are fixed per year per hectare for a specific area in the southern Californian chaparral where C. greggii comprises 1/3 of the ground cover. This amount appears to be large enough to replace the nitrogen that is lost annually by drainage and runoff from winter rain storms.