1. Reduction in diversity of both freshwater aquatic and terrestrial ecosystems has been attributed to salinity increase and such increases are a symptom of changes to land use. Hydrological alteration to ground and surface water are likely to be associated with salinity increase and its influence on biodiversity. However the combined effects of salinity and hydrology on aquatic biodiversity have not been elucidated fully in either field or experimental situations.2. The effect of salinity and water regime on the biota in sediments from seven wetlands from inland south-eastern Australia was tested experimentally using germination of aquatic plant seeds (five salinity and two water levels) and emergence of zooplankton eggs (five salinity levels). Salinity levels were <300, 1000, 2000, 3000, 5000 mg L−1 and water regimes were damp (waterlogged) and submerged.3. Aquatic plant germination and zooplankton hatching was not consistent for all seven wetland sediments. Four of the wetland sediments, Narran Lakes, Gwydir Wetlands, Macquarie Marshes and Billybung Lagoon showed similar responses to salinity and water regime but the other three wetland sediments from Lake Cowal, Great Cumbung Swamp and Darling Anabranch did not.4. As salinity increased above 1000 mg L−1 there was a decrease in the species richness and the abundance of biota germinating or hatching from sediment from four of the wetlands.5. Salinity had a particularly strong effect in reducing germination from sediments in damp conditions when compared to the flooded conditions. In parallel, salts accumulated in the sediment in damp conditions but did not in flooded conditions.6. There is potential for increasing salinity in freshwater rivers and wetlands to decrease the species richness of aquatic communities and thus of the wetland community as a whole, resulting in loss of wetland biodiversity. This reduction in diversity varies between wetlands and is at least partly related to hydrology. For aquatic plants the reduction in diversity will be more marked for plants germinating from seed banks at the edges of wetlands where plants are not completely submerged than for the same seed bank germinating in submerged conditions.