Sphagnum (peatmoss) dominates huge areas of the Northern Hemisphere and acts as a significant carbon sink on a global scale, yet little is known about the genetic structure of Sphagnum populations. We investigated genetic structure within a population of the common peatmoss Sphagnum fuscum, to assess local patterns of genetic diversity and the spatial extent of clones. One hundred seventeen shoots were sampled from five transects in Fuglmyra, central Norway, and sequenced for three anonymous DNA regions. Five neighbourhood patches were marked along each transect, and from each patch, five stems were sampled for molecular analyses. Seventeen haplotypes could be distinguished and two major groups of haplotypes differed by 12 mutational steps. The two major haplotype groups differed significantly in microhabitat association along the distance to groundwater table and the pH gradients, indicating microhabitat differentiation. The haplotypes within these groups were all genetically similar, differing by one or two mutations. The most common haplotype occurred in four transects separated by 250-m distance. Most of the molecular variation in the population was found among transects, and within patches. Large dominating clones within each transect resulted in low variation explained by the among-patch-within-transect component of spatial structure. Mutation appears to account for a larger proportion of the population variation than recombination. Within the population, vegetative growth and asexual reproduction from gametophyte fragments dominate as the main reproductive mode.