Climate change is affecting plant community composition and ecosystem structure, with consequences for ecosystem processes such as carbon storage^,,. Climate can affect plants directly by altering growth rates, and indirectly by affecting predators and herbivores, which in turn influence plants^,,,,. Diseases are also known to be important for the structure and function of food webs^,,,,. However, the role of plant diseases in modulating ecosystem responses to a changing climate is poorly understood^,. This is partly because disease outbreaks are relatively rare and spatially variable, such that that their effects can only be captured in long-term experiments. Here we show that, although plant growth was favoured by the insulating effects of increased snow cover in experimental plots in Sweden, plant biomass decreased over the seven-year study. The decline in biomass was caused by an outbreak of a host-specific parasitic fungus, Arwidssonia empetri, which killed the majority of the shoots of the dominant plant species, Empetrum hermaphroditum, after six years of increased snow cover. After the outbreak of the disease, instantaneous measurements of gross photosynthesis and net ecosystem carbon exchange were significantly reduced at midday during the growing season. Our results show that plant diseases can alter and even reverse the effects of a changing climate on tundra carbon balance by altering plant composition.