The determinants of dominant language fluency among immigrants and the labor market impact of this fluency are examined. The model is generally applicable, but the empirical tests are performed for adult foreign-born men in Australia (1981 and 1986 Australian censuses). The findings indicate that fluency responds to incentives, including economic incentives, and both the individual's exposure to and efficiency in acquiring dominant language skills. The analysis also shows that fluency enhances labor market earnings. Among immigrants from non-English speaking countries, those fluent in English had more than 9 percent higher earnings in 1986. Fluency is also shown to enhance the returns of other skills, including schooling and labor market experience. Two appendices present an analysis of the 1981 Australian census of population and housing, and descriptive statistics concerning adult foreign-born men. Contains 17 references. (LB)