It is generally considered that nitrogen availability is one of the major factors regulating primary production in temperate coastal marine environments. Coastal regions often receive large anthropogenic inputs of nitrogen that cause eutrophication. The impact of these nitrogen additions has a profound effect in estuaries and coastal lagoons where water exchange is limited. Such increased nutrient loading promotes the growth of phytoplankton and fast growing pelagic macroalgae while rooted plants (sea-grasses) and benthic are suppressed due to reduced light availability. This shift from benthic to pelagic primary production introduces large diurnal variations in oxygen concentrations in the water column. In addition oxygen consumption in the surface sediments increases due to the deposition of readily degradable biomass. In this review the physico-chemical and biological factors regulating nitrogen cycling in coastal marine ecosystems are considered in relation to developing effective management programmes to rehabilitate seagrass communities in lagoons currently dominated by pelagic macroalgae and/or cyanobacteria.