The potential nitrogen transforming activities of bacteria were measured in the water and biofilms of a Gravel Bed Hydroponic (GBH) sewage treatment system. Within the GBH system, the organic matter and biofilms create complex partitioned micro-environments which promote nitrogen cycling. Biofilms attached to the rhizomes of Phragmites auslralis support higher potential rates of nitrogen transformations per unit surface area than those attached to gravel. Comparison of the transforming activities of the bacteria with the environmental conditions within the bulk water identified the effectors of ammonification, nitrification and denitrification. Rhizome and gravel biofilms respond differently to changes in their environment Nitrogen transformation potential exists throughout the bed, but whereas the potential ammonification and nitrification activities are evenly distributed, those for denitrification are greatest at the top of the bed where the availability of carbon and the local redox conditions promote microbial production of gaseous nitrogen. Thus, the success of GBH beds in treating effluents can, in part, be explained by a stimulation of nitrification/denitrification activities on the surface of the rhizomes. The nature of the effluent will depend on the balance between the rates of these two processes.