<p>In nitrogen-limited lakes, cyanobacterial nitrogen (N) fixation rates can be high. However, the effect of cyanobacterial N fixation on ecosystem N availability depends, in part, on the retention of fixed N. Here, we explore patterns of benthic and pelagic N fixation and fixed N retention in Lake Mývatn, Iceland. Our N budget, updated from previous assessments, showed that the annual rate of lake-scale N fixation needed to account for the deficit between external N supply and N loss varies greatly from year to year, primarily due to variation in the magnitude of N loss via outflow and midge emergences that transport and deposit N on the shore. Extrapolations from recent direct measurements of pelagic and benthic N fixation under scenarios of different benthic and pelagic N-fixer abundances showed that the capacity for N fixation is much higher in the pelagic than the benthic zone. We then explored the degree to which N fixed in the pelagic zone is retained and recycled within the lake using a dynamic N budget that leverages data on patterns of N loss via the outlet river Laxá. This revealed that approximately two-thirds of organic N in the pelagic zone must be incorporated into the benthos to explain patterns of N loss via outflow from the river Laxá. Together, these results suggest N fixation in pelagic cyanobacterial blooms may supply most of the N for benthic primary production in Mývatn.</p>