Plant genes that are specifically activated by the rhizobial lipochitooligosaccharide signal molecule (Nod factor) in legume hosts are collectively referred to as nodulins. Although nodulin gene expression is both spatially and temporally correlated with symbiosis, the function of these genes and the molecular events underlying their expression remain unknown. Sequence analysis of rip1, an early nodulin gene encoding a putative peroxidase protein, revealed the existence of sequence motifs with homology to reactive oxygen species (ROS) responsive cis elements. Here we report that recognition of compatible Nod factor rapidly stimulates a spatially localized production of reactive oxygen species in legume roots. Sinorhizobium meliloti mutants that produce an altered Nod factor structure and a nonnodulating plant mutant, dmi1-1, that is implicated in Nod factor signal transduction are equally impaired in the ability to elicit ROS production and rip1 expression. Interestingly, both rip1 transcription and ROS production exhibit the same tissue-specific pattern of localization. Moreover, exogenous hydrogen peroxide is sufficient to activate rip1 transcription. Taken together, these results suggest that ROS production is a consequence of specific Nod factor perception and implicate H2O2 produced during this response as a mediator of Nod factor-induced rip1 expression.