The intercellular spaces of sugarcane (Saccharum officinarum L.) stem parenchyma are filled with solution (determined by cryoscanning microscopy), which can be removed aseptically by centrifugation. It contained 12% sucrose (Suc; pH 5.5.) and yielded pure cultures of an acid-producing bacterium (approximately 104 bacteria/mL extracted fluid) on N-poor medium containing 10% Suc (pH 5.5). This bacterium was identical with the type culture of Acetobacter diazotrophicus, a recently discovered N2-fixing bacterium specific to sugarcane, with respect to nine biochemical and morphological characteristics, including acetylene reduction in air. Similar bacteria were observed in situ in the intercellular spaces. This demonstrates the presence of an N2-fixing endophyte living in apoplastic fluid of plant tissue and also that the fluid approximates the composition of the endophytes's optimal culture medium. The apoplastic fluid occupied 3% of the stem volume; this approximates 3 tons of fluid/ha of the crop. This endogenous culture broth consisting of substrate and N2-fixing bacteria may be enough volume to account for earlier reports that some cultivars of sugarcane are independent of N fertilizers. It is suggested that genetic manipulation of apoplastic fluid composition may facilitate the establishment of similar symbioses with endophytic bacteria in other crop plants.