The circumboreal/circumpolar N2-fixing lichen Stereocaulon vesuvianum is among the most widespread and abundant fruticose species in montane Britain but has lost the capacity to fix N2 over large areas of the country. To investigate whether loss of N2-fixation in S. vesuvianum is linked to increased N deposition, we examined thallus morphology, physiology and chemistry at twelve locations representing an N deposition gradient of 3–40 kg ha−1 year−1. Measurements were made in parallel on a non-N2-fixing reference species (Parmelia saxatilis). The presence or absence of cephalodia (N2-fixing nodules containing the cyanobacterium Stigonema sp) was recorded in over 500 herbarium specimens of S. vesuvianum dating back to 1820. Cephalodium abundance in S. vesuvianum, and 15N concentration in S. vesuvianum and P. saxatilis, were strongly negatively correlated with N deposition and particularly with dry deposited N; cephalodia do not form at total N deposition rates ≥8–9 kg ha−1 year−1. Other morphological oddities in S. vesuvianum at N-polluted sites include increased apothecium (fungal reproductive structure) production and green algal biofilm development. Biofilm covered thalli without cephalodia lacked nitrogenase activity and cephalodia at sites where they rarely develop had nitrogenase activities typical for this species. The presence or absence of cephalodia in herbarium specimens of S. vesuvianum suggest that the present-day N-deposition linked gradient in N2-fixing capacity did not exist in the 19th century and largely developed between 1900–1940. Synthesis. We provide clear evidence that N2-fixing capacity in S. vesuvianum has been lost in regions subjected to many decades of enhanced atmospheric N deposition. This loss is consistent with established models of diazotrophy, which identify supply of combined N as an inhibitor of N2-fixation. Progressive depletion of thallus 15N with increasing N deposition is in line with available data indicating that much atmospheric N pollution is 15N-depleted. Rates of nitrogenase activity in S. vesuvianum are low compared to other symbiotic systems and perhaps more likely supplanted by elevated N deposition. We suggest that other ecosystem compartments with low rates of fixation (e.g. soils) might also be susceptible to N pollution and merit investigation. Keywords: 15N natural abundance, cephalodia, herbarium specimens, lichens, nitrogen deposition, nitrogen fixation, Stereocaulon vesuvianum.