Historical photographs document that during the last century, forests have expanded upwards by 60–80 m into former tundra of the pristine Ural mountains. We assessed how the shift of the high-altitude treeline ecotone might affect soil organic matter (SOM) dynamics. On the gentle slopes of Mali Iremel in the Southern Urals, we (1) determined the differences in SOM stocks and properties from the tundra at 1360 m above sea level (a.s.l.) to the subalpine forest at 1260 m a.s.l., and (2) measured carbon (C) and nitrogen (N) mineralization from tundra and forest soils at 7 and 20 °C in a 6-month incubation experiment. C stocks of organic layers were 3.6±0.3 kg C m−2 in the tundra and 1.9±0.2 kg C m−2 in the forest. Mineral soils down to the bedrock stored significantly more C in the forest, and thus, total soil C stocks were slightly but insignificantly greater in the forest (+3 kg C m−2). Assuming a space for time approach based on tree ages suggests that the soil C sink due to the forest expansion during the last century was at most 30 g C m−2 yr−1. Diffuse reflective infrared spectroscopy and scanning calorimetry revealed that SOM under forest was less humified in both organic and mineral horizons and, therefore, contained more available substrate. Consistent with this result, C mineralization rates of organic layers and A horizons of the forest were two to four times greater than those of tundra soils. This difference was similar in magnitude to the effect of increasing the incubation temperature from 7 to 20 °C. Hence, indirect climate change effects through an upward expansion of forests can be much larger than direct warming effects (Δ0.3 K across the treeline). Net N mineralization was 2.5 to six times greater in forest than in tundra soils, suggesting that an advancing treeline likely increases N availability. This may provide a nutritional basis for the fivefold increase in plant biomass and a tripling in productivity from the tundra to the forest. In summary, our results suggest that an upward expansion of forest has small net effects on C storage in soils but leads to changes in SOM quality, accelerates C cycling and increases net N mineralization, which in turn might stimulate plant growth and thus C sequestration in tree biomass.