The ecological significance of Bardawil Lagoon, the only oligotrophic hypersaline lagoon on the Mediterranean coast of Egypt, was assessed through studying counts, activities and the distribution of nitrogen-cycling bacteria. Counts and activities of ammonifying bacteria, ammonium-oxidising microbes (AOM) and nitrite-oxidising bacteria (NOB) were compared between sites colonised by macrophytes and bare sites. Microbial counts and activities, and the concentrations of both organic and inorganic nitrogen compounds, were higher at colonised sites. In late summer, as macrophytes started to die off, organic nitrogen content in the sediments increased, mineralisation of the organic nitrogen in the sediments was pronounced, and ammoniacal-N, nitrate-N and nitrite-N concentrations peaked. Counts of ammonifying bacteria, AOM and NOB were also at maximum during the same period, coinciding with the highest ammonification and nitrification rates.