Peatlands are carbon (C) storage ecosystems sustained by a high water level (WL). High WL creates anoxic conditions that suppress the activity of aerobic decomposers and provide conditions for peat accumulation. Peatland function can be dramatically affected by WL drawdown caused by land-use and/or climate change. Aerobic decomposers are directly affected by WL drawdown through environmental factors such as increased oxygenation and nutrient availability. Additionally, they are indirectly affected via changes in plant community composition and litter quality. We studied the relative importance of direct and indirect effects of WL drawdown on aerobic decomposer activity in plant litter. We did this by profiling 11 extracellular enzymes involved in the mineralization of organic C, nitrogen, phosphorus and sulphur. Our study sites represented a three-stage chronosequence from pristine (undrained) to short-term (years) and long-term (decades) WL drawdown conditions under two nutrient regimes. The litter types included reflected the prevalent vegetation, i.e., Sphagnum mosses, graminoids, shrubs and trees. WL drawdown had a direct and positive effect on microbial activity. Enzyme allocation shifted towards C acquisition, which caused an increase in the rate of decomposition. However, litter type overruled the direct effects of WL drawdown and was the main factor shaping microbial activity patterns. Our results imply that changes in plant community composition in response to persistent WL drawdown will strongly affect the C dynamics of peatlands.