Nitrous oxide (N2O) in soils is produced through nitrification and denitrification. The N2O produced is considered as a nitrogen (N) loss because it will most likely escape from the soil to the atmosphere as N2O or N2. Aim of the study was to quantify N2O production in grassland on peat soils in relation to N input and to determine the relative contribution of nitrification and denitrification to N2O production. Measurements were carried out on a weekly basis in 2 grasslands on peat soil (Peat I and Peat II) for 2 years (1993 and 1994) using intact soil core incubations. In additional experiments distinction between N2O from nitrification and denitrification was made by use of the gaseous nitrification inhibitor methyl fluoride (CH3F). Nitrous oxide production over the 2 year period was on average 34 kg N ha-1 yr-1 for mown treatments that received no N fertiliser and 44 kg N ha-1 yr-1 for mown and N fertilised treatments. Grazing by dairy cattle on Peat I caused additional N2O production to reach 81 kg N ha-1 yr-1. The sub soil (20–40 cm) contributed 25 to 40␘f the total N2O production in the 0–40 cm layer. The N2O production:denitrification ratio was on average about 1 in the top soil and 2 in the sub soil indicating that N2O production through nitrification was important. Experiments showed that when ratios were larger than l, nitrification was the major source of N2O. In conclusion, N2O production is a significant N loss mechanism in grassland on peat soil with nitrification as an important N2O producing process.