During a search for genes with induced or enhanced expression in the early stages of development of stem-borne nodules on Sesbania rostrata, a cDNA with homology to chalcone reductase (CHR) genes was isolated. Here, we describe the characterization of a full-length CHR cDNA (Srchr1) and the pattern of CHR transcript accumulation in stem-borne nodules. Expression was correlated with both nodule development and bacterial invasion. In young nodules, CHR transcripts were observed in cells of the parenchyma, in cells around the nodule vascular bundles, and in the uninfected cells of the central tissue.