Despite their low primary production, ombrotrophic peatlands are important long-term sinks for atmospheric carbon due to even lower rates of litter decomposition. Litter decomposition can be affected by plant functional types (PFTs; Graminoids, Ericoids) and microhabitat (hummock, lawn), but the microhabitat context-dependency of PFT effects on decomposition processes remains poorly understood. We used a long-term (> 10 yr) plant removal experiment, in conjunction with the Tea Bag Index (TBI), to explore how PFT removal in both hummock and lawn microhabitats influence decomposition. In parallel, we assessed potential activity of five extracellular hydrolytic enzymes as proxies for microbial activity. Our results indicate that PFT removal had no effect on the TBI decomposition constant ( k ), nor on the stabilisation factor (S). Yet, k increased slightly when both PFTs were absent. In the lawns, we observed higher values of S as compared to hummocks. A similar trend was observed for the decomposition rate constant ( k ). PFT compostion influenced the potential hyrolytic EEAs underlying decomposition process, however this influence was non-pervasive and depended on microhabitat. Our results suggest an important role for vegetation change – through their influence on enzyme activity – along the lawn-hummock gradient in regulating decomposition processes in northern peatlands. Our results highlight it is important to monitor the interplay between plant functional type composition and microhabitat in order to understand decomposition processes in peatlands.