Shallow stratigraphic features, such as infilled paleovalleys, modify fresh groundwater discharge to coastal waters and fluxes of saltwater and nutrients across the sediment–water interface. We quantify the spatial distribution of shallow surface water–groundwater exchange and nitrogen fluxes near a paleovalley in Indian River Bay, Delaware, using a hand resistivity probe, conventional seepage meters, and pore-water samples. In the interfluve (region outside the paleovalley) most nitrate-rich fresh groundwater discharges rapidly near the coast with little mixing of saline pore water, and nitrogen transport is largely conservative. In the peat-filled paleovalley, fresh groundwater discharge is negligible, and saltwater exchange is deep (∼1 m). Long pore-water residence times and abundant sulfate and organic matter promote sulfate reduction and ammonium production in shallow sediment. Reducing, iron-rich fresh groundwater beneath paleovalley peat discharges diffusely around paleovalley margins offshore. In this zone of diffuse fresh groundwater discharge, saltwater exchange and dispersion are enhanced, ammonium is produced in shallow sediments, and fluxes of ammonium to surface water are large. By modifying patterns of groundwater discharge and the nature of saltwater exchange in shallow sediments, paleovalleys and other stratigraphic features influence the geochemistry of discharging groundwater. Redox reactions near the sediment–water interface affect rates and patterns of geochemical fluxes to coastal surface waters. For example, at this site, more than 99% of the groundwater-borne nitrate flux to the Delaware Inland Bays occurs within the interfluve portion of the coastline, and more than 50% of the ammonium flux occurs at the paleovalley margin.