Wetlands are important and restricted habitats for dependent biota and play vital roles in landscape function, hydrology and carbon sequestration. They are also likely to be one of the most sensitive components of the terrestrial biosphere to global climate change. An understanding of relationships between wetland persistence and climate is imperative for predicting, mitigating and adapting to the impacts of future climate change on wetland extent and function. We investigated whether mire wetlands had contracted, expanded or remained stable during 1960–2000. We chose a study area encompassing a regional climatic gradient in southeastern Australia, specifically to avoid confounding effects of water extraction on wetland hydrology and extent. We first characterized trends in climate by examining data from local weather stations, which showed a slight increase in precipitation and marked decline in pan evaporation over the relevant period. Remote sensing of vegetation boundaries showed a marked lateral expansion of mires during 1961–1998, and a corresponding contraction of woodland. The spatial patterns in vegetation change were consistent with the regional climatic gradient and showed a weaker co-relationship to fire history. Resource exploitation, wildland fires and autogenic mire development failed to explain the observed expansion of mire vegetation in the absence of climate change. We therefore conclude that the extent of mire wetlands is likely to be sensitive to variation in climatic moisture over decadal time scales. Late 20th-century trends in climatic moisture may be related primarily to reduced irradiance and/or reduced wind speeds. In the 21st century, however, net climatic moisture in this region is projected to decline. As mires are apparently sensitive to hydrological change, we anticipate lateral contraction of mire boundaries in coming decades as projected climatic drying eventuates. This raises concerns about the future hydrological functions, carbon storage capacity and unique biodiversity of these important ecosystems.