1. Iceland has vast areas of mobile sand resulting from volcanic glacier bursts and erosion. Seed of the coastal, dune-building grass Leymus arenarius is harvested from natural stands for use in extensive land reclamation programmes. We investigated the economic use of fertilizer treatments in managing the production of seeds, and to facilitate the establishment and survival of seedlings. 2. Seed yield could be increased dramatically in coastal dunes by the application of nitrogen fertilizers, mainly as a result of increased flowering-spike density. Little short-term advantage accrued from additions of phosphorus or potassium. Additions of N (rapid-release formulations) at 50-100 kg ha-1 could be highly cost-effective in providing the current production from a much smaller area of dunes or in increasing seed production. Other consequences would be to minimize the environmental impact of harvesting and to allow more focused management of the seed resource. If periodic applications of P and K should prove necessary to maintain yield, they would be economically justifiable. 3. Establishment of seedlings on volcanic, sandy barrens over the first two seasons from sowing was improved by the application of slow-release fertilizers; however, rapid-release formulations applied annually, produced a similar tiller density and biomass after 4 years more economically. Untreated control populations became extinct over the same period, underlining the necessity for nutrient addition. A sand-culture experiment indicated that plants severely deprived of P allocated more dry mass to roots and rhizomes, and those deprived of K allocated more to above-ground parts. These responses might be manipulated to improve establishment in slowly and rapidly accreting environments, respectively. 4. The seed production of moribund, late-successional stands could not be rejuvenated by fertilizer application. On the contrary, where there was a vegetational response, competing species were stimulated at the expense of L. arenarius.