The removal of nitrogen from the water column is a critical ecosystem service provided by the sediment microbial community. If compromised, high nutrient loads can lead to eutrophic conditions that have catastrophic ecosystem effects. Port Phillip Bay in Victoria, Australia is a large, shallow bay with a slow exchange rate with the open ocean. The external nitrogen load to Port Phillip Bay has been estimated at 7500 t N year-1, yet only 13% of this is exchanged with the open ocean. Long term benthic chamber monitoring of nitrogen gas efflux has established that the sediment microbial community is removing nitrogen. However, the calculated removal efficiency varies with location and season. The aim of this study was to establish the dominant microbial functional pathways for nitrogen removal in this system and to identify the environmental factors that could be driving variation in nitrogen removal capacity. Sediment was collected from two sites, every three months, for two years. Changes in the gene and transcript abundances of known functional genes critical to nitrification, denitrification and anaerobic oxidation of ammonia (ANAMMOX) were quantified. This study has established that Port Phillip Bay is dominated by archaeal type nitrifiers and that both ANAMMOX and archaeal nitrite reduction pathways are competitive nitrogen loss mechanisms in this system.