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We investigated the effect of increased N-supply on productivity and potential litter decay rates of Carex species, which are the dominant vascular plant species in peatlands in the Netherlands. We hypothesized that: (1) under conditions of N-limited plant growth, increased N-supply will lead to increased productivity but will not affect C:N ratios of plant litter and potential decay rates of that litter; and (2) under conditions of P-limited plant growth, increased N-supply will not affect productivity but it will lead to lower C:N ratios in plant litter and thereby to a higher potential decay rate of that litter. These hypotheses were tested by fertilization experiments (addition of 10 g N m-2 year-1) in peatlands in which plant growth was N-limited and P-limited, respectively. We investigated the effects of fertilization on net C-fixation by plant biomass, N uptake, leaf litter chemistry and potential leaf litter decay. In a P-limited peatland, dominated by Carex lasiocarpa, there was no significant increase of net C-fixation by plant biomass upon enhanced N-supply, although N-uptake had increased significantly compared with the unfertilized control. Due to the N-fertilization the C:N ratio in the plant biomass decreased significantly. Similarly, the C:N ratio of leaf litter produced at the end of the experiment showed a significant decrease upon enhanced N-supply. The potential decay rate of that litter, measured as CO2-evolution from the litter under aerobic conditions, was significantly increase upon enhanced N-supply. In a N-limited peatland, dominated by C. acutiformis, the net C-fixation by plant biomass increased with increasing N-supply, whereas the increase in N-uptake was not significant. The C:N ratio of both living plant material and of dead leaves did not change in response to N-fertilization. The potential decay rate of the leaf litter was not affected by N-supply. The results agree with our hypotheses. This implies that atmospheric N-deposition may affect the CO2-sink function of peatlands, but the effect is dependent on the nature of nutrient limitation. In peatlands where plant growth is N-limited, increased N-supply leads to an increase in the net accumulation of C. Under conditions of P-limited plant growth, however, the net C-accumulation will decrease, because productivity is not further increased, whereas the amount of C lost through decomposition of dead organic matter is increased. As plant growth in most terrestrial ecosystems is N-limited, increased N-supply will in most peatlands lead to an increase of net C-accumulation.