Ecosystems are subject to multiple, natural and anthropogenic environmental influences, including nitrogen (N) deposition, land use and climate. Assessment of the relative importance of these influences on biodiversity and ecosystem functioning is crucial for guiding policy and management decisions to mitigate global change; yet, few studies consider multiple drivers. In the UK, ongoing loss of the internationally important arctic/alpine moss-sedge community, Racomitrium heath, has been linked to elevated N deposition, high grazing pressures and their combination; however, the relative importance of these drivers remains unclear. We used environmental gradients across the habitat's European distribution (UK, Faroes, Norway and Iceland) to investigate the relative impact of N deposition and grazing pressure, as well as climate, on the condition of the dominant moss species, Racomitrium lanuginosum. Key variables including tissue chemistry, growth and cover were measured at 36 sites, and multiple linear regressions were used to examine the relative importance of the drivers across sites. Our results clearly show that regional variation in the condition of R. lanuginosum across Europe is primarily associated with the impacts of N deposition, with climate (air temperature) and grazing pressure playing secondary roles. In contrast to previous experimental studies, we found moss growth to be stimulated by elevated N deposition; this apparent discrepancy may result from the use of artificially high N concentrations in many experiments. Despite increased growth rates, we found that moss mat depth and cover declined in response to N deposition. Our results suggest that this is due to increased decomposition of material in the moss mat, which ultimately leads to loss of moss cover and habitat degradation. This study clearly demonstrates both the key role of N deposition in degradation of Racomitrium heath and the importance of observational studies along natural gradients for testing predictions from experimental studies in the real world.