To evaluate the effect of climate change on ecosystem functioning, the temperature and moisture response of microbial C, N, and P transformations during decomposition of Calluna vulgaris (L.) Hull. litter was studied in a laboratory incubation experiment. The litter originated from a dry heathland in the Netherlands where P limited vegetation growth. Fresh litter was incubated at 5, 10, 15, or 20°C and at a moisture content of 50, 100, or 200% in a full factorial design. Microbial nutrient transformations and activity were evaluated during two successive periods: an initial period of 48 days characterized by microbial growth and a second period from 48 to 206 days in which microbial growth declined significantly. Temperature and moisture response of respiration rate, the metabolic quotient (qCO 2 ), C, N, and P immobilization, net N and P mineralization and nitrification rates were evaluated by performing linear regressions. Microbial nutrient transformations and microbial activity depended both on temperature and moisture. In the first period, the respiration rate, qCO 2 , microbial C and N immobilization, net P mineralization, net N mineralization and net nitrification rates were more strongly affected by temperature, while the microbial P immobilization rate was more strongly affected by moisture. The respiration rate, qCO 2 , P immobilization rate, net P and N mineralization rate, and nitrification rate increased with temperature and moisture, while the C and N immobilization rate decreased with increasing temperature and increased with moisture. In the second period, C, N, and P immobilization and net N and P mineralization rates were significantly lower. The respiration rate and qCO 2 continued to increase with temperature and moisture, but C and N immobilization rates increased with temperature and declined with increasing moisture. Net P mineralization rate decreased at higher temperature and moisture, and nitrification rate declined with increasing temperature and increased with moisture. It was concluded that plant growth in these P-limited systems is very sensitive to climate change as it strongly relies on the competition for P with microbes, and temperature and moisture have a large effect on the immobilization rate of available P.