The effect of sulfate on methane production in Lake Mendota sediments was investigated to clarify the mechanism of sulfate inhibition of methanogenesis. Methanogenesis was shown to be inhibited by the addition of as little as 0.2 mM sulfate. Sulfate inhibition was reversed by the addition of either H2 or acetate. Methane evolved when inhibition was reversed by H2 additions was derived from 14CO2. Conversely, when acetate was added to overcome sulfate inhibition, the evolved methane was derived from [2-14C]acetate. A competition for available H2 and acetate was proposed as the mechanism by which sulfate inhibited methanogenesis. Acetate was shown to be metabolized even in the absence of methanogenic activity. In the presence of sulfate, the methyl position of acetate was converted to CO2. The addition of sulfate to sediments did not result in the accumulation of significant amounts of sulfide in the pore water. Sulfate additions did not inhibit methanogenesis unless greater than 100 mug of free sulfide per ml was present in the pore water. These results indicate that carbon and electron flow are altered when sulfate is added to sediments. Sulfate-reducing organisms appear to assume the role of methanogenic bacteria in sulfate-containing sediments by utilizing methanogenic precursors.