Previous research has shown that N-2 fixation in soybean [Glycine max (L.) Merr.] is sensitive to drought and begins to decrease at relatively high soil water contents. The Pact that N-2 fixation rates decrease with soil water deficits in advance of other physiological processes causes an important constraint on soybean performance. Recent evidence, however, indicates possible genetic variation within soybean for this trait. The cultivar Jackson reportedly has N-2 fixation activity that was relatively drought insensitive. The objective of this research was to investigate the physiological basis of this unique response in Jackson in comparison with the drought-sensitive cultivar Biloxi. Experiments were carried out with plants grown in pots in a greenhouse and exposed to drought by soil dehydration. The drought tolerance of N-2 fixation In Jackson was confirmed, as well as in one of its parents, 'Volstate'. Interestingly, Jackson as either the rootstock or scion in grafting studies conferred drought tolerance. Enriching the atmosphere with oxygen around the nodules resulted in a complete recovery of nodule activity in moderately drought-stressed plants and in partial recovery as the stress severity Increased. Elevated oxygen also induced a substantial stimulation of acetylene-reduction rates in Jackson well-watered plants. Finally, Jackson was found to have lower levels of ureides in petioles in well-watered plants than in a sensitive cultivar, and the accumulation of ureides under drought was much Less in Jackson. These results demonstrated that N metabolism, physiology, and genetic background are important in accounting for unique behavior of N-2 fixation in Jackson under water-deficit conditions.