This study investigated the abundance, distribution, and composition of microbial communities at the watershed scale in a boreal peatland within the Marcell Experimental Forest (MEF), Minnesota, USA. Through a close coupling of next-generation sequencing, biogeochemistry, and advanced analytical chemistry, a biogeochemical hot spot was revealed in the mesotelm (30- to 50-cm depth) as a pronounced shift in microbial community composition in parallel with elevated peat decomposition. The relative abundance of Acidobacteria and the Syntrophobacteraceae, including known hydrocarbon-utilizing genera, was positively correlated with carbohydrate and organic acid content, showing a maximum in the mesotelm. The abundance of Archaea (primarily crenarchaeal groups 1.1c and 1.3) increased with depth, reaching up to 60% of total small-subunit (SSU) rRNA gene sequences in the deep peat below the 75-cm depth. Stable isotope geochemistry and potential rates of methane production paralleled vertical changes in methanogen community composition to indicate a predominance of acetoclastic methanogenesis mediated by the Methanosarcinales in the mesotelm, while hydrogen-utilizing methanogens predominated in the deeper catotelm. RNA-derived pyrosequence libraries corroborated DNA sequence data to indicate that the above-mentioned microbial groups are metabolically active in the mid-depth zone. Fungi showed a maximum in rRNA gene abundance above the 30-cm depth, which comprised only an average of 0.1% of total bacterial and archaeal rRNA gene abundance, indicating prokaryotic dominance. Ratios of C to P enzyme activities approached 0.5 at the acrotelm and catotelm, indicating phosphorus limitation. In contrast, P limitation pressure appeared to be relieved in the mesotelm, likely due to P solubilization by microbial production of organic acids and C-P lyases. Based on path analysis and the modeling of community spatial turnover, we hypothesize that P limitation outweighs N limitation at MEF, and microbial communities are structured by the dominant shrub, Chamaedaphne calyculata, which may act as a carbon source for major consumers in the peatland.