In response to deprivation for fixed nitrogen, the filamentous cyanobacterium Anabaena sp. strain PCC 7120 provides a microoxic intracellular environment for nitrogen fixation through the differentiation of semiregularly spaced vegetative cells into specialized cells called heterocysts. The devH gene is induced during heterocyst development and encodes a product with characteristics of a trans-acting regulatory protein. A devH mutant forms morphologically distinguishable heterocysts but is Fox(-), incapable of nitrogen fixation in the presence of oxygen. We demonstrate that rearrangements of nitrogen fixation genes take place normally in the devH mutant and that it is Fix(+), i.e., has nitrogenase activity under anoxic conditions. The Fox(-) phenotype was shown by ultrastructural studies to be associated with the absence of the glycolipid layer of the heterocyst envelope. The expression of glycolipid biosynthetic genes in the mutant is greatly reduced, and heterocyst glycolipids are undetectable.