A method for in-situ removal of hydrocarbon contaminants from groundwater comprises contacting in-situ groundwater containing hydrocarbon contaminants such as gasoline and its components in aqueous solution with a permeable barrier comprising a peat material. In one embodiment, the groundwater stream containing hydrocarbon contaminants in aqueous solution is contacted in-situ with the permeable barrier, with the permeable barrier being positioned substantially perpendicular to the groundwater stream incident thereto. In another embodiment, the groundwater stream containing hydrocarbon contaminants in aqueous solution is contacted in-situ with a permeable barrier which comprises, in series, an immobilized nutrient layer and peat material layer, and the permeable barrier is positioned substantially perpendicular to the groundwater stream incident thereto. The immobilized nutrient layer enhances the natural degradation of the hydrocarbon contaminants, and any contaminants which are not degraded in the immobilized nutrient layer are removed by the peat material layer.