Historically, slow decomposition rates have resulted in the accumulation of large amounts of carbon in northern peatlands. Both climate warming and vegetation change can alter rates of decomposition, and hence affect rates of atmospheric CO2 exchange, with consequences for climate change feedbacks. Although warming and vegetation change are happening concurrently, little is known about their relative and interactive effects on decomposition processes. To test the effects of warming and vegetation change on decomposition rates, we placed litter of three dominant species (Calluna vulgaris, Eriophorum vaginatum, Hypnum jutlandicum) into a peatland field experiment that combined warming with plant functional group removals, and measured mass loss over two years. To identify potential mechanisms behind effects, we also measured nutrient cycling and soil biota. We found that plant functional group removals exerted a stronger control over short-term litter decomposition than did ~1°C warming, and that the plant removal effect depended on litter species identity. Specifically, rates of litter decomposition were faster when shrubs were removed from the plant community, and these effects were strongest for graminoid and bryophyte litter. Plant functional group removals also had strong effects on soil biota and nutrient cycling associated with decomposition, whereby shrub removal had cascading effects on soil fungal community composition, increased enchytraeid abundance and increased rates of N mineralization. Our findings demonstrate that, in addition to litter quality, changes in vegetation composition plays a significant role in regulating short-term litter decomposition and below-ground communities in peatland, and that these impacts can be greater than moderate warming effects. Our findings, albeit from a relatively short-term study, highlight the need to consider both vegetation change, and its impacts below-ground, alongside climatic effects when predicting future decomposition rates and carbon storage in peatlands.