Physical, chemical, biochemical and microbial properties of riparian soils beneath native scrub (Leptospermum scoparium), grazed pasture, and set-aside pasture along the edge of a third order stream near Taupo, New Zealand were compared. In the 12 years since retirement from grazing, dominant vegetation in the set-aside areas changed from pasture grasses to native tussock (Pea cita). Riparian set-aside soils had an extremely high hydraulic conductivity in the surface horizon (6340 mm h(-1)) compared with that in the riparian grazed pasture (15 mm h(-1)) indicating that surface runoff water transported into the zone would infiltrate, fill soil pores and emerge as subsurface flow at the stream edge. Phosphorus available for transport was highest in riparian set-aside soils, indicating P saturation of the zone. Nitrate pool size was strongly correlated to nitrifying potential (Spearman's rho = 0.897), with both being extremely low in riparian set-aside. Microbial biomass was greater in riparian set-aside (1900 mg C g(-1)) than riparian native (1460 mg C g(-1)) or riparian pasture (1080 mg C g(-1)). The results imply that riparian set-aside has led to the development of a zone likely to supply runoff to the adjacent stream that is depleted in sediment-bound nutrients and dissolved N but enriched in dissolved P.