The basement at Site 1068, Ocean Drilling Program (ODP) Leg 173 (serpentinized peridotite in fault contact with overlying amphibolite-clast-dominated sedimentary and tectonic breccias) is host to a hydrothermal system rooted in serpentinization reactions occurring at depth. The serpentinite grades downward from cataclasites at the fault, through brecciated, recrystallized, tochilinite-bearing serpentinite, to awaruite-bearing massive, mesh-textured serpentinite. Andradite is common throughout and is a major sink for iron. The breccias are similarly zoned, from tectonized rocks near the fault upward into sedimentary breccias. Mg-silicate vein assemblages and rodingitized amphibolite clasts near the fault give way to calcite veins and nonpervasive albite-chlorite alteration upsection. Marcasite (¿ pyrrhotite at the fault) is the sulfide phase and occurs only in the tectonic breccias. Fe oxides are magnetite near the fault and hematite and ferric oxyhydroxides upsection. The zonation reflects mixing of seawater with a fluid whose composition (low fO2, fS2, Si, CO2, high Ca, Fe, Ca/Mg, pH) is controlled by serpentinization reactions. The deepest serpentinites have strongly reduced mineral assemblages that are unusual in a totally serpentinized peridotite. This probably reflects equilibration with a fluid derived from ongoing serpentinization at depth. The upper serpentinites, on through the mineral sequences seen in the breccias reflect increasing input from seawater upsection. Increased fO2 and fS2 stabilizes increasingly S- and O-rich assemblages. Calcite (and ferric oxide) precipitation decreases pH, stabilizing marcasite. Relative to mid-ocean ridge hydrothermal systems, fluids in serpentinite-hosted hydrothermal systems are poor in S and rich in Mg and are unlikely to host large sulfide ore deposits.