We present the soft X–ray spectrum of the LINER galaxy M81 derived from a long observation with the XMM-Newton RGS . The spectrum is dominated by continuum emission from the active nucleus , but also contains emission lines from Fe L , and H-like and He-like N , O , and Ne . The emission lines are significantly broader than the RGS point-source spectral resolution ; in the cross dispersion direction the emission lines are detected adjacent to , as well as coincident with , the active nucleus . This implies that they originate in a region of a few arc-minutes spatial extent ( 1 arc-minute \sim 1 kpc in M81 ) . The flux ratios of the OVII triplet suggest that collisional processes are responsible for the line emission . A good fit to the whole RGS spectrum is obtained using a model consisting of an absorbed power law from the active nucleus and a 3 temperature optically thin thermal plasma . Two of the thermal plasma components have temperatures of 0.18 \pm 0.04 keV and 0.64 \pm 0.04 keV , characteristic of the hot interstellar medium produced by supernovae ; the combined luminosity of the plasma at these two temperatures accounts for all the unresolved bulge X–ray emission seen in the Chandra observation by Tennant et al . ( [ 2001 ] ) . The third component has a higher temperature ( 1.7 ^ { +2.1 } _ { -0.5 } keV ) , and we argue that this , along with some of the 0.64 keV emission , comes from X–ray binaries in the bulge of M81 .