Peatlands store one‐third of the Earth's carbon. Human activities and climate change‐induced peatland vegetation shift from Sphagnum to shrub may lead to peatland degradation. To understand the ecology and functions of these peatlands, we collected samples from 10 peatland mosaics dominated by Sphagnums, mixed plant communities of Sphagnums, and shrubs across south China. Through sequencing the plant rhizosphere microbiome and measuring peat properties, we explored the plant–soil interactions and identified the keystone microbial taxa in peatlands of three vegetation types. Results showed that peat pH decreased along with the plant community shift from Sphagnum to shrub, which may be due to the accumulation of sulfur and phenolics. Lower pH further reduced bacterial diversity in shrub peatlands as Acidobacteriota became predominant in the keystone taxa. Overall, microbiomes in shrub peatlands showed degraded properties, such as a less stable microbial community dominated by few keystone taxa and the loss of methane‐mitigating microbes. The keystone microbial taxa in Sphagnum peatlands included microbes that utilize insoluble organic substances, mono‐ and oligo‐saccharides. Most importantly, the methanotrophic microbes that oxidize methane only appeared in the keystone taxa of Sphagnum peatlands. Mixed plant community peatlands contained the highest concentrations of iron. Slow‐growing fungi and bacteria were in the keystone microbial taxa, indicating slow decomposition rates in these peatlands. Our study suggests that human activity and climate change‐induced peatland vegetation shift from Sphagnum to shrub leads to an unstable belowground community, indicating the degraded peatland, which may exacerbate in the future.