The crucial role of tropical forests in the global carbon balance is determined by tree growth and the rapid turnover of organic material. Land-use change and forest recovery from disturbance alters species- and functional diversity, which in turn can modify decomposition processes and affect ecosystem carbon and nutrient cycling. Despite numerous studies on tropical litter decomposition, the links among plant- and invertebrate diversity and microbial function are far from clear. I investigated the influence of altered functional diversity of litter species and arthropod communities on litter decomposition and soil carbon dynamics in a semi-deciduous lowland tropical forest in Panama. I used size-based arthropod exclusions and different litter mixtures in experimental mesocosms in a 60-year-old secondary forest to assess changes in soil respiration and decomposition rates within a single experimental arena. Litter mixtures represented different combinations of tree functional groups. Arthropods >2.5 mm were excluded from half the mesocosms using wire mesh. To link functional diversity above-and below ground to soil carbon dynamics, I identified arthropods in the litter and measured litter chemistry, soil CO2 efflux, and litter mass loss. I found that decomposition in mesocosms was similar to that measured with the conventional litterbag method and consequently, mesocosms are an effective method to measure litter decomposition and soil respiration in a single arena. Decomposition varied among litter types, as expected based on their physical and chemical properties, whereby pioneer species litter decomposed most rapidly and old-growth-species litter decomposed the slowest. Arthropod community composition was affected by both leaf litter treatment and sampling date. These results indicate that changes in functional diversity of litter and arthropods could have wider implications for ecosystem functioning in tropical forests.