Much of the crop residues, including cereal straw, that are produced worldwide are lost by burning. Plant residues, and in particular straw, contain large amounts of carbon (cellulose and hemicellulose) which can serve as substrates for the production of microbial biomass and for biological N-2 fixation by a range of free-living, diazotrophic bacteria, Microorganisms with the dual ability to utilise cellulose and fix N-2 are rare, but some strains that utilize hemicellulose and fix N-2 have been found. Generally, cellulolysis and diazotrophy are carried out by a mixed microbial community in which N-2-fixing bacteria utilise cellobiose and glucose produced from straw by cellulolytic microorganisms. N-2-fixing bacteria include heterotrophic and phototrophic organisms and the latter are apparently more prominent in flooded soils such as rice paddies than in dryland soils. The relative contributions of N-2 fixed by heterotrophic diazotrophic bacteria compared with cyanobacteria and other phototrophic bacteria depend on the availability of substrates from straw decomposition and on environmental pressures. Measurements of asymbiotic N2 fixation are limited and variable but, in rice paddy systems, rates of 25 kg N ha(-1) over 30 days have been found, whereas in dryland systems with wheat straw, in situ measurements have indicated up to 12 kg N ha(-1) over 22 days. Straw-associated N-2 fixation is directly affected by environmental factors such as temperature, moisture, oxygen concentration, soil pH and clay content as well as farm management practices. Modification of managements and use of inoculants offer ways of improving asymbiotic N-2 fixation. In laboratory culture systems, inoculation of straws with cellulolytic and diazotrophic microorganisms has resulted in significant increases in N-2 fixation in comparison to uninoculated controls and gains of N of up to 72 mg N fixed g(-1) straw consumed have been obtained, indicating the potential of inoculation to improve N gains in composts that can then be used as biofertilisers. Soils, on the other hand, contain established, indigenous microbial populations which tend to exclude inoculant microorganisms by competition. As a consequence, improvements in straw-associated N-2 fixation in soils have been achieved mostly by specific straw-management practices which encourage microbial activity by straw-decomposing and N-2-fixing microorganisms. Further research is needed to quantify more accurately the contribution of asymbiotic N-2 fixation to cropping systems. New strains of inoculants, including those capable of both cellulolytic and N-2-fixing activity, are needed to improve the N content of biofertilisers produced from composts. Developments of management practices in farming systems may result in further improvements in N-2 fixation in the field.