The fate and transport of inorganic nitrogen (N) is a critically important issue for human and aquatic ecosystem health because discharging N-contaminated groundwater can foul drinking water and cause algal blooms. Factors controlling N-processing were examined in sediments at three sites with contrasting hydrologic regimes at a lake on Cape Cod, MA. These factors included water chemistry, seepage rates and direction of groundwater flow, and the abundance and potential rates of activity of N-cycling microbial communities. Genes coding for denitrification, anaerobic ammonium oxidation (anammox), and nitrification were identified at all sites regardless of flow direction or groundwater dissolved oxygen concentrations. Flow direction was, however, a controlling factor in the potential for N-attenuation via denitrification in the sediments. Potential rates of denitrification varied from 6 to 4500 pmol N/g/h from the inflow to the outflow side of the lake, owing to fundamental differences in the supply of labile organic matter. The results of laboratory incubations suggested that when anoxia and limiting labile organic matter prevailed, the potential existed for concomitant anammox and denitrification. Where oxic lake water was downwelling, potential rates of nitrification at shallow depths were substantial (1640 pmol N/g/h). Rates of anammox, denitrification, and nitrification may be linked to rates of organic N-mineralization, serving to increase N-mobility and transport downgradient.