Sphagnum capillifolium mesocosms collected from an ombrotrophic blanket bog were subjected to controlled photon flux densities (control and shaded) and nitrogen (low and high) treatments between November 2003 and August 2004. Shading significantly reduced biomass of S. capillifolium (P < 0.001), whilst nitrogen (N) supply significantly increased biomass (P < 0.05) suggesting that S. capillifolium was limited by N. There was no significant interaction between shading and N on biomass. S. capillifolium responded to shading via morphophysiological and biochemical alterations to the photosynthetic tissues such as (1) break down of anthocyanins involved in photoprotection of chloroplasts, (2) translocation of N from mineralized N or old tissues and (3) allocation of translocated N to photosynthetic pigments. The results suggest that S. capillifolium can tolerate both low and high light intensities, as well as high N supply via morphophysiological responses but does not acclimate to deep shade, since biomass was reduced. Anthocyanins rather than carotenoids appear to play an essential role in photoprotection with translocation serving as the important source of N. It has been suggested that global change in temperature and N availability may lead to increased vascular plant growth that could increase shade leading to a shift from Sphagnum spp. to vascular species in peatlands. However, the species S. capillifolium appears to tolerate deep shade and high N deposition due to the mechanisms shown here suggesting that this species may continue to persist in peatland ecosystems.