Increases in solar ultraviolet-B radiation (UV-B; 280–320 nm) reaching the earth have been estimated to continue until 2050s in the boreal and subarctic regions with an abundant peatland cover. Peatlands are significant sinks for carbon dioxide (CO2) and sources for methane (CH4). To assess whether the future increases in UV-B could affect the fluxes of CO2 and CH4 in peatlands via an impact on vegetation, we exposed peatland microcosms to modulated 30% supplementation of erythemally weighted UV-B at an outdoor facility for one growing season. The experimental design included appropriate controls for UV-A and ambient radiation. The UV-B caused a significant reduction in gross photosynthesis, net ecosystem CO2 exchange, and CH4 emission of the peatland microcosms. These changes in the carbon gas cycling can be partly explained by UV-B-induced morphological changes in Eriophorum vaginatum which acts as a conduit for CH4. Leaf cross section and the percentage of CH4-conducting aerenchymatous tissue in E. vaginatum were significantly reduced by UV-B. Methanol-extractable UV-B absorbing compounds decreased under both UV-B and UV-A in Sphagnum angustifolium, and tended to accumulate under UV-B in S. papillosum. Membrane permeability to magnesium (Mg) and calcium (Ca) ions was higher in UV-B exposed S. angustifolium. Amount of chlorophyll and carotenoid pigments was increased by UV-A in S. magellanicum. The observed changes in Sphagnum mosses did not coincide with those in carbon gas fluxes but occurred at the time of the highest UV intensity in the mid summer. Our findings indicate that increasing UV-B may have more substantial effects on gas exchange in peatlands than previously thought.