High acidity, low temperature and extremely low concentration of nutrients form Sphagnum bogs into extreme habitats for organisms. Little is known about the bacteria associated with living Sphagnum plantlets, especially about their function for the host. Therefore, we analysed the endo- and ectophytic bacterial populations associated with two widely distributed Sphagnum species, Sphagnum magellanicum and Sphagnum fallax, by a multiphasic approach. The screening of 1222 isolates for antagonistic activity resulted in 326 active isolates. The bacterial communities harboured a high proportion of antifungal (26%) but a low proportion of antibacterial isolates (0.4%). Members of the genus Burkholderia (38%) were found to be the most dominant group of antagonistic bacteria. The finding that a large proportion (89%) of the antagonistic bacteria produced antifungal compounds may provide an explanation for the well-known antimicrobial activity of certain Sphagnum species. The secondary metabolites of the Sphagnum species themselves were analysed by HPLC-PDA. The different spectra of detected compounds may not only explain the antifungal activity but also the species specificity of the microbial communities. The latter was analysed using cultivation-independent single-stranded conformation polymorphism (SSCP) analysis. Using Burkholderia-specific primers we found a high diversity of Burkholderia isolates in the endophytic and ectophytic habitats of Sphagnum. Furthermore, a high diversity of nitrogen-fixing bacteria was detected by using nifH-specific primers, especially inside Sphagnum mosses. In conclusion, this study provides evidence that both Sphagnum species were colonized by characteristic bacterial populations, which appear to be important for pathogen defence and nitrogen fixation.