The initiation and development of nitrogen (N-2) fixing nodules in the roots of leguminous plants occurs by the induction of cell division and redifferentiation in the root cortex, followed by the formation of a meristem and progressive differentiation of specialized cells and tissues. During this process, competent rhizobia invade the root and become specialized N-2-fixing endosymbionts. The onset of the symbiosis is largely mediated by an exchange of diffusible signals, bacterial lipo-oligosaccharides being the main determinants of specificity and the initial inducers of plant responses. It is however the host which controls most facets of the nodulation process, including nodule morphology, efficiency, specificity and function. The dissection of plant mechanisms underlying signal-transduction during nodulation may be crucial to understand and then manipulate the symbiosis. Positional cloning or gene targeting offer strategies that promise the identification of crucial plant genes determining nodulation. The search for the nts - 1 gene that controls nodulation in soybean illustrates the challenges and limitations of positional cloning. It also shows how biotechnology can offer tools to help in the breeding of plant traits important to agriculture. Molecular dissection of the symbiosis will ultimately be used to improve N-2 fixation by molecular breeding and genetic engineering in legumes. (C) 1997 Elsevier Science B.V.