Increased N deposition in Europe has affected mire ecosystems. However, knowledge on the physiological responses is poor. We measured photosynthetic responses to increasing N deposition in two peatmoss species (Sphagnum balticum and Sphagnum fuscum) from a 3-year, north-south transplant experiment in northern Europe, covering a latitudinal N deposition gradient ranging from 0.28 g N m(-2) year(-1) in the north, to 1.49 g N m(-2) year(-1) in the south. The maximum photosynthetic rate (NP(max)) increased southwards, and was mainly explained by tissue N concentration, secondly by allocation of N to the photosynthesis, and to a lesser degree by modified photosystem II activity (variable fluorescence/maximum fluorescence yield). Although climatic factors may have contributed, these results were most likely attributable to an increase in N deposition southwards. For S. fuscum, photosynthetic rate continued to increase up to a deposition level of 1.49 g N m(-2) year(-1), but for S. balticum it seemed to level out at 1.14 g N m(-2) year(-1). The results for S. balticum suggested that transplants from different origin (with low or intermediate N deposition) respond differently to high N deposition. This indicates that Sphagnum species may be able to adapt or physiologically adjust to high N deposition. Our results also suggest that S. balticum might be more sensitive to N deposition than S. fuscum. Surprisingly, NP(max) was not (S. balticum), or only weakly (S. fuscum) correlated with biomass production, indicating that production is to a great extent is governed by factors other than the photosynthetic capacity.