Nitrogenase consists of two proteins that work in concert to reduce atmospheric dinitrogen to a biologically useful form, ammonia (Curr. Opin. Chem. Biol. 2000, 4, 559-566; Chem. Rev. 1996, 96, 2965-2982). The smaller of the proteins (the so-called Fe protein) shuttles high-energy electrons to the larger subunit (the so-called MoFe protein) where the reduction of dinitrogen molecules takes place. The Fe protein catalyzes the hydrolysis of two MgATP molecules per electron transferred to the MoFe protein. The physical mechanism that couples the ATP hydrolysis and electron-transfer reactions in nitrogenase is one of the "great mysteries" of nitrogen fixation. Our goal is to describe the free-energy transformations that occur in nitrogenase based upon theoretical analysis of structural and electrochemical data. The electrostatic and thermodynamic analysis described here, made possible by recent X-ray structural data (and motivated by closely related electrochemical studies: Biochemistry 1997, 36, 12976-12983; FEES Lett. 1998, 432, 55-58), shows that the ATP hydrolysis energy in nitrogenase serves the purpose of increasing the driving force of the electron-transfer reaction in the protein-protein complex. MgATP binding induces conformational changes and protein-protein association. The protein-protein docking excludes water from the negatively charged [Fe4S4]S-4(cys) redox cofactor that lies near the Fe-protein surface, boosting its energy through diminished solvation. We estimated the induced redox-potential change to be equal to or larger than one-third of an electronvolt, which is roughly the energy associated with the hydrolysis of one MgATP molecule. Nitrogenase appears, therefore, to employ a relatively simple ATP hpdrolysis coupled redox cofactor desolvation mechanism to energize, and thus to accelerate, interprotein electron transfer. Our analysis also indicates that electrostatic interactions play an important role in the substitution of MgADP by MgATP upon reduction of the [Fe4S4]S-4(cys) cluster in the Fe protein. The nitrogenase scheme of energy conversion may suggest alternative strategies for the design of new molecular devices.