Nitrogen (N) pollution of peatlands alters their carbon (C) balances, yet long-term effects and controls are poorly understood. We applied the model PEATBOG to explore impacts of long-term nitrogen (N) fertilization on C cycling in an ombrotrophic bog. Simulations of summer gross ecosystem production (GEP), ecosystem respiration (ER) and net ecosystem exchange (NEE) were evaluated against 8 years of observations and extrapolated for 80 years to identify potential effects of N fertilization and factors influencing model behaviour. The model successfully simulated moss decline and raised GEP, ER and NEE on fertilized plots. GEP was systematically overestimated in the model compared to the field data due to factors that can be related to differences in vegetation distribution (e.g. shrubs vs. graminoid vegetation) and to high tolerance of vascular plants to N deposition in the model. Model performance regarding the 8-year response of GEP and NEE to N input was improved by introducing an N content threshold shifting the response of photosynthetic capacity (GEPmax) to N content in shrubs and graminoids from positive to negative at high N contents. Such changes also eliminated the competitive advantages of vascular species and led to resilience of mosses in the long-term. Regardless of the large changes of C fluxes over the short-term, the simulated GEP, ER and NEE after 80 years depended on whether a graminoid- or shrub-dominated system evolved. When the peatland remained shrub–Sphagnum-dominated, it shifted to a C source after only 10 years of fertilization at 6.4 g N m−2 yr−1, whereas this was not the case when it became graminoid-dominated. The modelling results thus highlight the importance of ecosystem adaptation and reaction of plant functional types to N deposition, when predicting the future C balance of N-polluted cool temperate bogs.