Nitrogen fixation by aerobic prokaryotes appears paradoxical: the nitrogen-fixing enzymes—nitrogenases—are notoriously oxygen-labile, yet many bacteria fix nitrogen aerobically. This review summarises the evidence that cytochrome bd , a terminal oxidase unrelated to the mitochondrial and many other bacterial oxidases, plays a crucial role in aerotolerant nitrogen fixation in Azotobacter vinelandii and other bacteria by rapidly consuming oxygen during uncoupled respiration. We review the pertinent properties of this oxidase, particularly its complement of redox centres, the catalytic cycle of oxygen reduction, the affinity of the oxidase for oxygen, and the regulation of cytochrome bd gene expression. The roles of other oxidases and other mechanisms for limiting damage to nitrogenase are assessed.