Plant allocation to defensive compounds in response to growth in elevated atmospheric CO2 in combination with two levels of nitrogen was examined. The aim was to discover if allocation patterns of transgenic plants containing genes for defensive chemicals which had not evolved in the species would respond as predicted by the Carbon Nutrient Balance (CNB) hypothesis. Cotton plants (Gossypium hirsutum L.) were sown inside 12 environmental chambers. Six of them were maintained at an elevated CO2 level of 900 µmol mol-1 and the other six at the current level of 370 µmol mol-1. Half the plants in each chamber were from a transgenic line producing Bacillus thuringiensis (Bt) toxin and the others were from a near isogenic line without the Bt gene. The allocation to total phenolics, condensed tannins, and gossypol and related terpenoid aldehydes was measured. All the treatments were bioassayed against a non-target insect herbivore found on cotton, Spodoptera exigua (Hübner) (Lepidoptera: Noctuidae). Plants had lower N concentrations and higher C:N ratios when grown in elevated CO2. Carbon defensive compounds increased in elevated CO2, low N availability or both. The increase in these compounds in elevated CO2 and low N, adversely affected growth and survival of S. exigua. The production of the nitrogen-based toxin was affected by an interaction between CO2 and N; elevated CO2 decreased N allocation to Bt, but the reduction was largely alleviated by the addition of nitrogen. The CNB hypothesis accurately predicted only some of the results, and may require revision. These data indicate that for the future expected elevated CO2 concentrations, plant allocation to defensive compounds will be affected enough to impact plant-herbivore interactions.