Peat mosses of the genus Sphagnum are ecosystem engineers that frequently predominate over photosynthetic production in boreal peatlands. Sphagnum spp. host diverse microbial communities capable of nitrogen fixation (diazotrophy) and methane oxidation (methanotrophy), thereby potentially supporting plant growth under severely nutrient-limited conditions. Moreover, diazotrophic methanotrophs represent a possible “missing link” between the carbon and nitrogen cycles, but the functional contributions of the Sphagnum-associated microbiome remain in question. A combination of metagenomics, metatranscriptomics, and dual-isotope incorporation assays was applied to investigate Sphagnum microbiome community composition across the North American continent and provide empirical evidence for diazotrophic methanotrophy in Sphagnum-dominated ecosystems. Remarkably consistent prokaryotic communities were detected in over 250 Sphagnum SSU rRNA libraries from peatlands across the United States (5 states, 17 bog/fen sites, 18 Sphagnum species), with 12 genera of the core microbiome comprising 60% of the relative microbial abundance. Additionally, nitrogenase (nifH) and SSU rRNA gene amplicon analysis revealed that nitrogen-fixing populations made up nearly 15% of the prokaryotic communities, predominated by Nostocales cyanobacteria and Rhizobiales methanotrophs. While cyanobacteria comprised the vast majority (>95%) of diazotrophs detected in amplicon and metagenome analyses, obligate methanotrophs of the genus Methyloferula (order Rhizobiales) accounted for one-quarter of transcribed nifH genes. Furthermore, in dual-isotope tracer experiments, members of the Rhizobiales showed substantial incorporation of 13CH4 and 15N2 isotopes into their rRNA. Our study characterizes the core Sphagnum microbiome across large spatial scales and indicates that diazotrophic methanotrophs, here defined as obligate methanotrophs of the rare biosphere (Methyloferula spp. of the Rhizobiales) that also carry out diazotrophy, play a keystone role in coupling of the carbon and nitrogen cycles in nutrient-poor peatlands.