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Peatland ecosystems cover only 3% of the world's land area; however, they store one-third of the global soil carbon (C). Microbial communities are the main drivers of C decomposition in peatlands, yet we have limited knowledge of their structure and function. While the microbial communities in the Northern Hemisphere peatlands are well documented, we have limited understanding of microbial community composition and function in the Southern Hemisphere peatlands, especially in Australia. We investigated the vertical stratification of prokaryote and fungal communities from Wellington Plains peatland in the Australian Alps. Within the peatland complex, bog peat was sampled from the intact peatland and dried peat from the degraded peatland along a vertical soil depth gradient (i.e., acrotelm, mesotelm, and catotelm). We analyzed the prokaryote and fungal community structure, predicted functional profiles of prokaryotes using PICRUSt, and assigned soil fungal guilds using FUNGuild. We found that the structure and function of prokaryotes were vertically stratified in the intact bog. Soil carbon, manganese, nitrogen, lead, and sodium content best explained the prokaryote composition. Prokaryote richness was significantly higher in the intact bog acrotelm compared to degraded bog acrotelm. Fungal composition remained similar across the soil depth gradient; however, there was a considerable increase in saprotroph abundance and decrease in endophyte abundance along the vertical soil depth gradient. The abundance of saprotrophs and plant pathogens was two-fold higher in the degraded bog acrotelm. Soil manganese and nitrogen content, electrical conductivity, and water table level (cm) best explained the fungal composition. Our results demonstrate that both fungal and prokaryote communities are shaped by soil abiotic factors and that peatland degradation reduces microbial richness and alters microbial functions. Thus, current and future changes to the environmental conditions in these peatlands may lead to altered microbial community structures and associated functions which may have implications for broader ecosystem function changes in peatlands. [ABSTRACT FROM AUTHOR]