Peatlands play a critical role in the global carbon cycle by storing large amounts of carbon, but their remote locations and challenging terrain make them difficult to study directly. Remote sensing technologies, such as hyperspectral reflectance and sun-induced fluorescence (SIF), offer new ways to monitor vegetation health and function in these ecosystems. Peatland vegetation is made up of two main groups: mosses and vascular plants, which differ in structure and physiology. These differences affect how they respond to climate conditions like drought. In this study, we grew different plant types (bog cranberries, graminoids, and Sphagnum mosses) in monocultures and in mixed communities under natural conditions in a temperate European peatland. We measured reflectance, SIF, and leaf-level fluorescence throughout the growing season. We found that mosses responded quickly to dry periods, with noticeable drops in physiological activity, while vascular plants remained relatively stable. Mosses also had lower chlorophyll levels and photosynthetic efficiency compared to vascular plants. In mixed vegetation, optical signals were dominated by shrubs, not mosses. These results show how important it is to distinguish between plant types when interpreting remote sensing measurements, helping us better monitor peatland health in a changing climate.