Legume-based pastures, particularly those containing a large proportion of lucerne (alfalfa, Medicago sativa), have a prodigious capacity to fix atmospheric N-2. Budgets of N show that permanent pastures in south-eastern Australia, when growing with no management limitations, can supply more N than is removed in animal products and can eventually lead to excess soil N. For a mixed crop-livestock farm, legume-dominant ley pastures occupying similar to 40% of the land area can maintain a stable N balance. The actual performance of pastures on farms normally falls below the potential. Pastures are being replaced by crops in the wheat-sheep zone and, to a lesser extent, in the high-rainfall zone. Pasture productivity, as indicated by the area topdressed, the mean stocking rate, input of superphosphate and sale of pasture legume seed has decreased in the period 1990-2010. It is therefore likely that N-2 fixation by pastures is falling sharply in the wheat-sheep zone and is static or falling slightly in the high-rainfall zone. Reversing the decrease in N-2 fixation by pastures will become important if the real price of N fertilisers increases, as seems likely because the efficiency of fertiliser synthesis is approaching a maximum and the reserves of natural gas feedstock will eventually be depleted. Increased N-2 fixation by pastures will depend on more profitable grazing industries, improved management methods and genotypes, and re-adoption of ley pastures by farmers. There is evidence that profitability of grazing enterprises is approaching that of crops so investment in pasture science is likely to lead to increased N-2 fixation.