The blooms of cyanobacteria that develop each summer in the Baltic Sea are composed of two functional groups, namely the small-sized picocyanobacteria (Synechococcus sp.) and the larger, colony-forming, filamentous N2-fixing cyanobacteria. The former encompassed both red (phycoerythrin-rich) and blue-green (phycocyanin-rich) species. The majority of the picocyanobacteria measured less than 1 μm and this size fraction comprised as much as 80% of the total cyanobacterial biomass and contributed as much as 50% of the total primary production of a cyanobacterial bloom. The picocyanobacteria are incapable of fixing N2, do not possess gas vesicles and are not toxic. However, a small filamentous Pseudanabaena sp. that could potentially fix N2 was isolated from the picocyanobacteria fraction. The larger cyanobacteria may form surface scums because they possess gas vesicles that make them buoyant. Although their biomass was less than the picocyanobacteria, they therefore form the more conspicuous and nuisance-forming part of the bloom. The larger cyanobacteria were composed mainly of three different species: Nodularia spumigena, Aphanizomenon flos-aquae and Anabaena sp. These all belong to the heterocystous, N2-fixing cyanobacteria. N. spumigena and A. flos-aquae were the dominant species; only N. spumigena was toxic. Although individual Nodularia filaments showed a range of different phenotypes, they all belong to one species as judged from 16S rDNA sequencing. Through determination of the genotypes of many individual Nodularia filaments, it was shown that this population was not clonal and that horizontal exchange of genetic information occurs. N. spumigena and A. flos-aquae were different with respect to their photosynthetic and N2-fixing potentials. Depending on prevailing environmental conditions, these differences would promote the proliferation of one species over the other and hence would determine overall the toxicity of a bloom. Daily integrals of photon irradiance rather than temperature determined the onset of bloom formation. During a bloom, the diazotrophic cyanobacteria fixed N2 at a rate that was 10–20% in excess of their own demand for N. Picocyanobacteria assimilated most of this excess N as shown by 15N incorporation. During bloom conditions, the diazotrophic cyanobacteria met about 50% of the N demand of the total cyanobacterial community. The picocyanobacteria were predominantly N-limited while the diazotrophic cyanobacteria were probably iron limited. These findings allow us to understand the formation of toxic cyanobacterial blooms and also to develop tools to predict bloom formation.