Although it is well-established that Sphagnum mosses host diverse microbial communities responsible for mediating carbon and nitrogen cycling in peatlands, the effects of climate change on the composition and function of the Sphagnum microbiome remain unclear. In this study, we investigated the impact of nitrogen deposition on the Sphagnum palustre microbiome, focusing on nitrogen-fixing and methane-oxidizing microorganisms. To assess the microbiome’s response to nitrogen deposition, we conducted next-generation sequencing of small subunit (SSU) rRNA and nitrogenase (nifH) gene amplicons while measuring nitrogen fixation and methane oxidation rates in Sphagnum palustre under long-term nitrogen deposition. The study found that nitrogen deposition significantly altered the composition and diversity of the S. palustre microbiome, with a notable decrease in the abundance of Cyanobacteria. Additionally, nitrogen deposition had a nonlinear effect on microbial α-diversity, with diversity indices significantly increasing under high nitrogen treatment. However, nitrogen fixation and methane oxidation activity exhibited distinct trends under nitrogen deposition. While nitrogen fixation activity significantly decreased at higher nitrogen deposition levels, methane oxidation activity peaked under moderate nitrogen concentrations. Our results indicate that nitrogen deposition significantly influences the community composition, diversity, methane oxidation activity, and nitrogen fixation activity of the Sphagnum palustre microbiome, potentially affecting host adaptability, ecosystem productivity, and carbon storage capacity in peatlands. These findings provide new insights into the effects of nitrogen deposition on Sphagnum microbial communities and their role in carbon and nitrogen cycling.