St. Margaret's Bay is one of the bays of the Atlantic coast of Nova Scotia, which owes its present form to flooding as sea level rose following deglaciation. It has a central, rather flat, deep basin, separated from the shelf by a sill. Two metres or so below the central basin floor lies a prominent acoustic reflector, not due to lithological changes within the sediment. We suggest that this is caused by gas, in part at least methane. Methane content increases with depth in sediment cores, and could be present in gaseous form (not just dissolved). There is a concomitant decrease in organic carbon with depth, and it appears that a part of this carbon is responsible for the generation of methane under reducing conditions below 2 m or so. The source of the organic carbon could be kelp, produced in abundance in the Bay, which has a very high primary productivity.