Interactive effects of elevated atmospheric CO2 and soil N availability on N2 fixation and biomass production were examined using Gliricidia sepium, a tropical leguminous tree species. Our objective was to determine if elevated CO2 alters the inhibitory effects of soil N on N2 fixation, and whether the response of Gliricidia to elevated CO2 was a function of N source originating from either substrate N fertilizer or N2 fixation. We hypothesized that CO2 enrichment would ameliorate the inhibitory effects of N fertilization on seedling nodulation and N2 fixation through increased C partitioning to nodules. Seedlings were grown from seed for 100 d in growth chambers at either 350 or 700 μmol mol−1 CO2. Seedlings were inoculated with Rhizobium spp. and grown either with 0, 1 or 10 mM N fertilizer. The δ15N isotope-dilution technique was used to determine N source partitioning between N2 fixation and inorganic N fertilizer uptake. The addition of 10 mM N fertilizer significantly reduced nodule number and mass, specific nitrogenase activity, the specific rate of N2 fixation, and the proportion of plant N derived from N2 fixation. Elevated CO2, however, strongly ameliorated the inhibitory effects of N fertilization, indicating that increased C availability for nodule activity may partially offset the inhibition of N2 fixation caused by substrate N, as nodule sugar concentrations were stimulated with CO2 enrichment. This study clearly shows that elevated CO2 enhanced plant productivity and net N content of Gliricidia tree seedlings by stimulating N2 fixation. In addition, seedling biomass production was greatly enhanced by elevated CO2, regardless of whether plant N was derived from the substrate or from the atmosphere. We conclude from this study that CO2 enrichment mitigates the inhibitory effects of substrate N on nodule initiation and development and specific N2 fixation, either through increased C allocation to nodule production and activity, or through increased N demand by the plant for biomass production. This experiment with Gliricidia provides evidence for a positive feedback between increased atmospheric CO2 concentrations, C allocation to symbiotic N2-fixing bacteria, and plant C and N accumulation that may occur when N2-fixing plants are grown under conditions where substrate N may typically inhibit N2 fixation.