The ability of the nitrogen-fixing bacterial endophyte Acetobacter diazotrophicus strain PAl5 to enhance the growth of sugarcane SP70-1143 was evaluated in the growth chamber, greenhouse, and field by comparing plants inoculated with wild-type and Nif mutant MAd3A in two independent experiments. The wild-type and Nif mutant strains colonized sugarcane plants equally and persisted in mature plants. In N-deficient conditions, sugarcane plants inoculated with A. diazotrophicus PAl5 generally grew better and had a higher total N content 60 days after planting than did plants inoculated with mutant MAd3A or uninoculated plants. These results indicate that the transfer of fixed N from A. diazotrophicus to sugarcane might be a significant mechanism for plant growth promotion in this association. When N was not limiting, growth enhancement was observed in plants inoculated with either wild-type or Nif- mutants, suggesting the additional effect of a plant growth promoting factor provided by A. diazotrophicus. A 15N2 incorporation experiment demonstrated that A. diazotrophicus wild-type strains actively fixed N2 inside sugarcane plants, whereas the Nif- mutants did not.