Peatlands are species poor but rather robust ecosystems. Hence, peatlands challenge biodiversity–ecosystem function theory, which generally links high species diversity to stable ecosystem functions. An open question in peatland ecology, however, is whether co-occurring peat moss species – the key ecosystem engineer in peatlands – contribute to the stability of peatland ecosystem processes under enviro-climatic change. We used a replacement series mesocosm experiment using monocultures and three mixtures of Sphagnum cuspidatum and Sphagnum medium that were grown in a controlled environment to assess the response of net ecosystem CO2 exchange (NEE) to mild and severe drought conditions, and consecutive rewetting. Furthermore, we assessed the effects of mild and deep drought on three ecosystem stability metrics: resistance, resilience, and recovery rate. Our results show a positive effect of mild drought on NEE with no apparent role for the composition of the peat moss community. Deep drought, on the other hand, gravely affects NEE on the short-term, yet recovery rates are substantial. The effect of deep drought was highest in S. cuspidatum monocultures and lowest in S. medium monocultures. An opposite trend was observed for NEE recovery rates, which were highest for S. cuspidatum monocultures. We found resistance and resilience of NEE to be drought dependent. Our study indicates that the carbon uptake capacity of peatlands is rather resilient to mild drought, but is seriously affected by deep drought Moreover, co-occurrence of peat moss species seems to enhance the resilience – i.e. ability of NEE to return to pre-perturbation levels – of the carbon uptake function of peat moss communities that experience mild drought. These findings suggest that mixtures of co-occurring Sphagnum moss species contribute to the stability of ecosystem functions in peatlands under mild drought conditions, aiding in the ecosystems role as carbon sinks. Our results also highlight the importance of preventing severe drought conditions to manifest in peatlands as the sink capacity can be lost under prolonged drought.