Peatlands harbor more than one-third of terrestrial carbon leading to the argument that the bryophytes, as major components of peatland ecosystems, store more organic carbon in soils than any other collective plant taxa. Plants of the genus Sphagnum is an important component of peatland ecosystems and are potentially vulnerable to changing climatic conditions. However, the response of Sphagnum to rising temperatures, elevated CO2 and shifts in local hydrology have yet to be fully characterized. In this review, we examine Sphagnum biology and ecology and explore the role of this keystone species and its associated microbiome in carbon and nitrogen cycling using literature review and model simulations. Several issues are highlighted including the consequences of a variable environment on plant-microbiome interactions, uncertainty associated with CO2 diffusion resistances and the relationship between fixed N and that partitioned to the photosynthetic apparatus. We note that the Sphagnum fallax genome is currently being sequenced and outline potential applications of population-level genomics and corresponding plant photosynthesis and microbial metabolic modeling techniques. We highlight Sphagnum as a model organism to explore ecosystem response to a changing climate, and to define the role that Sphagnum can play at the intersection of physiology, genetics and functional genomics.