The influence of effluent addition on denitrification potential in the Thredbo Wetland was observed by comparing an area of the wetland receiving secondary treated effluent with another area receiving no effluent addition. Physico-chemical measurements (Eh, pH and temperature) of the soil were conducted in both sampling areas to characterise the denitrifying environment. Levels of nitrate plus nitrite and ammonium ion in the soil from 0-30cm depth were recorded on a seasonal basis to identify the role of effluent addition and vertical distribution of inorganic nitrogen species in controlling the distribution of denitrification potential in the soil. Denitrification potentials of soils and decaying plant material were evaluated by the acetylene blockage technique. This involved laboratory incubations under optimum conditions of pH, temperature, nitrate concentration, carbon supply, and diffusion. The influence of these physico-chemical factors on denitrification was also investigated. It was found that the effluent addition caused higher denitrification potential in soils and surface decaying plant material by raising soil temperature, lowering Eh, and increasing concentrations of nitrate plus nitrite and ammonium ions. The highest denitrification potential was recorded in the decaying plant material on the soil surface. The highest soil denitrification potential occurred in the 0-6cm depth segment. Carbon supply and pH had no influence on denitrification potential whilst low temperature (5ºC), and restricted diffusion limited denitrification. In terms of tertiary water treatment denitrification in Thredbo Wetland makes a significant-contribution to the removal of nitrogen year-round. However, total nitrogen removal could be increased by increasing the residence time of water in the wetland thereby encouraging greater spatial and temporal interaction between the denitrifiers and the wastewater nitrogen.