The photosynthetic properties of cyanobiont lichens from contrasting habitats were measured to identify whether the increased assimilation rates which characterized Peltigera membranacea (Ach.) Nyl. from an exposed habitat were correlated with increased carbon-concentrating mechanism (CCM) activity. The results were contrasted with data obtained from two populations of Peltigera praetextata (Flörke ex Sommerf.) Zopf collected from dry and damp microhabitats within a shaded woodland and Peltigera leucophlebia (Nyl.) Gyelnik, which has been shown to lack a carbon-concentrating mechanism. The differences in assimilation rates between the cyanobiont lichens were not accounted for by differences in chlorophyll content. Peltigera membranacea from the exposed habitat which had the highest assimilation rates had the lowest Gamma; and K0·5 values and accumulated the greatest Ci-pool indicating that increased Ci accumulation contributed towards the higher assimilation rates shown by these species. The convexity of the light response curve for the cyanobiont lichens decreased with increasing assimilation rates. This might have indicated a diversion of electron transport to energize the carbon-concentrating mechanism. The apparent quantum efficiency of CO2 assimilation (ΦCO2) was correlated with the genus of lichen photobiont. All cyanobiont lichens had comparable values for ΦCO2 which were greater than that of the tripartite Peltigera leucophlebia. Light compensation points reflected the exposure of the habitats with higher compensation points characterizing the cyanobiont population from the exposed crag and the tri-partite population from the open grassland. Carbon isotope discrimination values for organic matter and measured instantaneously were the same for all cyanobiont lichens and were comparable with values recorded for species with a carbon-concentrating mechanism. Carbon isotope measurements for P. leucophlebia were typical of those recorded for species without a carbon-concentrating mechanism. Variation in source isotope signature and refixation of respiratory CO2 were considered to be significant factors in determining organic matter and instantaneous carbon-isotope discrimination. These factors might have masked any subtle variation in carbon-isotope discrimination which resulted from variable CCM activity. The functional significance of increased carbon-concentrating mechanism activity in cyanobiont lichens occupying exposed habitats is discussed.