In this study we measured changes in population levels of free-living N2-fixing bacteria in the root zones of potted Bouteloua eriopoda and Sporobolus fexuosus plants as well as the photosynthetic indices of the plants in response to added nitrogen, added water, and added water plus nitrogen treatments. In addition, N2 fixer population changes in response to added carbon source and nitrogen were measured in plant-free soil columns. There were significant increases in the numbers of N2 fixers associated with both plant species in the water and the water plus nitrogen treatments. Both treatments increase the photosynthetic index, suggesting that plant exudates were driving N2 fixer population changes. Population increases were greatest in the water plus nitrogen treatments, indicating that added nitrogen was synergistic with added water and suggesting that nitrogen addition spared bacteria the metabolic cost of N2 fixation, allowing greater reproduction. Plant-free column studies demonstrated a synergistic carbon-nitrogen effect when carbon levels were limiting (low malate addition) but not when carbon was abundant (high malate), further supporting this hypothesis. The results of this study indicate the presence of N2 fixer populations which interact with plants and which may play a role in the nitrogen balance of desert grasslands.