Australia is amongst the more efficient milk producers in the world.Milk production in the region of south-western Victoria relies mainly on rainfed white clover/perennial ryegrass pastures.As the demand for efficient and competitive milk production increases, the value of N2 fixation must be maximised. The objective of this thesis was to assess N2 fixation in grazed dairy pastures in south-western Victoria. Several tests and experiments were conducted and results noted. Studies revealed low white clover yields to be the major factor limiting N2 fixation in the region. For N2 fixation to have a significant impact on pasture quality and production, problems associated with legume persistence need to be addressed. Strategies may include the breeding of white clover cultivars with greater tolerance to water stress, improved winter production and increased competitiveness with companion species. Alternatively, the introduction of different legume species, better suited to the environment, may be appropriate. Where N2 fixation is unlikely to satisfy N demands, it may be necessary to introduce the strategic use of supplementary feeds or nitrogenous fertilisers. However, this would need to be carefully considered to ensure high input costs did not jeopardise the competitive advantage of low input pasture-based systems / Masters Thesis