Climate change is expected to cause extensive vegetation changes in the Arctic: deciduous shrubs are already expanding, in response to climate warming. The results from transect studies suggest that increasing shrub cover will impact significantly on the surface energy balance. However, little is known about the direct effects of shrub cover on permafrost thaw during summer. We experimentally quantified the influence of Betula nana cover on permafrost thaw in a moist tundra site in northeast Siberia with continuous permafrost. We measured the thaw depth of the soil, also called the active layer thickness (ALT), ground heat flux and net radiation in 10 m diameter plots with natural B. nana cover (control plots) and in plots in which B. nana was removed (removal plots). Removal of B. nana increased ALT by 9% on average late in the growing season, compared with control plots. Differences in ALT correlated well with differences in ground heat flux between the control plots and B. nana removal plots. In the undisturbed control plots, we found an inverse correlation between B. nana cover and late growing season ALT. These results suggest that the expected expansion of deciduous shrubs in the Arctic region, triggered by climate warming, may reduce summer permafrost thaw. Increased shrub growth may thus partially offset further permafrost degradation by future temperature increases. Permafrost models need to include a dynamic vegetation component to accurately predict future permafrost thaw.