The effects of dietary nitrate supplementation and defaunation on methane (CH4) emission, microbial protein outflow, digesta kinetics and average daily gain were studied in lambs fed chaff containing 4.1% crude protein in dry matter. Twenty ewe lambs were randomly allocated in a 2 × 2 factorial experiment (0% or 3.1% calcium nitrate supplementation and defaunated or faunated protozoal state). Nitrate supplementation increased blood methaemoglobin concentration (P < 0.05), rumen volatile fatty acids, ammonia concentration, dry matter intake, microbial protein outflow, average daily gain, dry matter digestibility, clean wool growth and wool fibre diameter (P < 0.01). Nitrate increased CH4 production (g/day) due to greater dry matter intake, but did not affect CH4 yield (g/kg dry matter intake). Nitrate-supplemented lambs had a shorter total mean retention time of digesta in the gut (P < 0.05). Defaunation reduced CH4 production and CH4 yield by 43% and 47%, but did not cause changes in dry matter intake, microbial protein outflow, average daily gain or clean wool growth. Defaunation decreased total volatile fatty acids and the molar percentage of propionate, but increased the molar percentage of acetate (P < 0.05). Interactions were observed such that combined treatments of defaunation and nitrate supplementation increased blood methaemoglobin (P ≤ 0.04), and decreased CH4 yield (P ≤ 0.01).