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In the Cape Fynbos of South Africa, Psoralea pinnata (L.) plants occur naturally in both wetland and well-drained soils and yet effectively fix N 2 under the two contrasting conditions. In this study, nodule structure and functioning in P. pinnata plants from the two habitats were evaluated using light and transmission electron microscopy (TEM), as well as the 15 N natural abundance technique. The results showed that, structurally, fully developed P. pinnata nodules were spherical in shape with six components (namely, lenticels, periderm, outer cortex, middle cortex, inner cortex, and a central bacteria-infected medulla region). Morphometric analysis revealed 44 and 84 % increase in cell area and volume of wetland nodules compared to those from upland. The percentage area of nodules occupied by the middle cortex in wetland nodules was twice that of upland nodules. As a result, the size of the medulla region in wetland nodules was significantly reduced compared to upland nodules. Additionally, the average area of medulla occupied by intercellular air spaces in wetland nodules was about five times that of upland nodules (about 431 % increase in wetland over upland nodules). TEM data also showed more bacteroids in symbiosomes of upland nodules when compared to wetland nodules. However, isotopic analysis of above-ground plant parts revealed no differences in symbiotic parameters such as N concentration, ∂ 15 N and %Ndfa between wetland and upland P. pinnata plants. These results suggest that, under limiting O 2 conditions especially in wetlands, nodules make structural and functional adjustments to meet the O 2 demands of N 2 -fixing bacteroids.