We report the discovery of novel subcellular structures related to bacterial nitrogen fixation in the strictly respiratory diazotrophic bacterium Azoarcus sp. BH72, which was isolated as an endophyte from Kallar grass. Nitrogenase is derepressed under microaerobic conditions at O2 concentrations in the micromolar range. With increasing O2 deprivation, bacteria can develop into a hyperinduced state, which is characterized by high specific rates of respiration and efficient nitrogen fixation at approximately 30 nM O2. Ultrastructural analysis of cells in the course of hyperinduction revealed that complex intracytoplasmic membrane systems are formed, which consist of stacks of membranes and which are absent under standard nitrogen-fixing conditions. The iron protein of nitrogenase was highly enriched on these membranes, as evidenced by immunohistochemical studies. Membrane deficiency in NifH/K- mutants, a deletion mutant in the nifK gene and the character of NH+4-grown cells suggested, in concert with the membrane localization of nitrogenase, that these structures are specialized membranes related to nitrogen fixation. We propose the term 'diazosomes' for them. Development of intracytoplasmic membranes coincides with the appearance of a high-molecular-mass form of the iron protein of nitrogenase, which was detectable in membrane fractions. Mutational analysis, and determination of the N-terminal amino acid sequence indicate that the nifH gene product is covalently modified by a mechanism probably different from adenosine diphosphoribosylation. Development of diazosomes in nitrogen-fixing cells can be induced in pure cultures and in co-culture with a fungus isolated from the rhizosphere of Kallar grass.