Colonies of N(2)-fixing cyanobacteria are key players in supplying new nitrogen to the ocean, but the biological fate of this fixed nitrogen remains poorly constrained. Here, we report on aerobic and anaerobic microbial nitrogen transformation processes that co-occur within millimetre-sized cyanobacterial aggregates (Nodularia spumigena) collected in aerated surface waters in the Baltic Sea. Microelectrode profiles showed steep oxygen gradients inside the aggregates and the potential for nitrous oxide production in the aggregates' anoxic centres. (15)N-isotope labelling experiments and nutrient analyses revealed that N(2) fixation, ammonification, nitrification, nitrate reduction to ammonium, denitrification and possibly anaerobic ammonium oxidation (anammox) can co-occur within these consortia. Thus, N. spumigena aggregates are potential sites of nitrogen gain, recycling and loss. Rates of nitrate reduction to ammonium and N(2) were limited by low internal nitrification rates and low concentrations of nitrate in the ambient water. Presumably, patterns of N-transformation processes similar to those observed in this study arise also in other phytoplankton colonies, marine snow and fecal pellets. Anoxic microniches, as a pre-condition for anaerobic nitrogen transformations, may occur within large aggregates (⩾1 mm) even when suspended in fully oxygenated waters, whereas anoxia in small aggregates (<1 to ⩾0.1 mm) may only arise in low-oxygenated waters (⩽25 μM). We propose that the net effect of aggregates on nitrogen loss is negligible in NO(3)(-)-depleted, fully oxygenated (surface) waters. In NO(3)(-)-enriched (>1.5 μM), O(2)-depleted water layers, for example, in the chemocline of the Baltic Sea or the oceanic mesopelagic zone, aggregates may promote N-recycling and -loss processes.