Using a large-scale field experiment with passive and active warming, we assessed the plant and soil invertebrate response in a Sphagnum peatland over four years. Increases in small-bodied soil species suggest direct metabolic effects from warming, but we also observed increased species richness in the dominant group of soil invertebrates and increased heterogeneity in plant communities. Warming reduced peat moisture content, impacting semi-aquatic invertebrates, but increased the presence of more xeric species not typically present in peatlands. Warming-induced reductions in moisture facilitated the establishment of species from surrounding forests and suggests impending terrestrialization of the Sphagnum peatland under warming.