Although fungi are known to colonize and decompose plant tissues in various environments, there is scanty information on fungal communities on wetland plants, their relation to microhabitat conditions, and their link to plant litter decomposition. We examined fungal diversity and succession on Phragmites australis leaves both attached to standing shoots and decaying in the litter layer of a brackish tidal marsh. Additionally, we followed changes in fungal biomass (ergosterol), leaf nitrogen dynamics, and litter mass loss on the sediment surface of the marsh. Thirty-five fungal taxa were recorded by direct observation of sporulation structures. Detrended correspondence analysis and cluster analysis revealed distinct communities of fungi sporulating in the three microhabitats examined (middle canopy, top canopy, and litter layer), and indicator species analysis identified a total of seven taxa characteristic of the identified subcommunities. High fungal biomass developed in decaying leaf blades attached to standing shoots, with a maximum ergosterol concentration of 548 +/- 83 microg g(-1) ash-free dry mass (AFDM; mean +/- SD). When dead leaves were incorporated in the litter layer on the marsh surface, fungi experienced a sharp decline in biomass (to 191 +/- 60 microg ergosterol g(-1) AFDM) and in the number of sporulation structures. Following a lag phase, species not previously detected began to sporulate. Leaves placed in litter bags on the sediment surface lost 50% of their initial AFDM within 7 months (k = -0.0035 day(-1)) and only 21% of the original AFDM was left after 11 months. Fungal biomass accounted for up to 34 +/- 7% of the total N in dead leaf blades on standing shoots, but to only 10 +/- 4% in the litter layer. These data suggest that fungi are instrumental in N retention and leaf mass loss during leaf senescence and early aerial decay. However, during decomposition on the marsh surface, the importance of living fungal mass appears to diminish, particularly in N retention, although a significant fraction of total detrital N may remain associated with dead hyphae.