Biogeochemical cycles are driven by the metabolic activity of microbial communities, yet the environmental parameters that underpin shifts in the functional potential coded within microbial community genomes are still poorly understood. Salinity is one of the primary determinants of microbial community structure and can vary strongly along gradients within a variety of habitats. To test the hypothesis that shifts in salinity will also alter the bulk biogeochemical potential of aquatic microbial assemblages, we generated four metagenomic DNA sequence libraries from sediment samples taken along a continuous, natural salinity gradient in the Coorong lagoon, Australia, and compared them to physical and chemical parameters. A total of 392483 DNA sequences obtained from four sediment samples were generated and used to compare genomic characteristics along the gradient. The most significant shifts along the salinity gradient were in the genetic potential for halotolerance and photosynthesis, which were more highly represented in hypersaline samples. At these sites, halotolerance was achieved by an increase in genes responsible for the acquisition of compatible solutes-organic chemicals which influence the carbon, nitrogen and methane cycles of sediment. Photosynthesis gene increases were coupled to an increase in genes matching Cyanobacteria, which are responsible for mediating CO2 and nitrogen cycles. These salinity driven shifts in gene abundance will influence nutrient cycles along the gradient, controlling the ecology and biogeochemistry of the entire ecosystem.