Sphagnum is a dominant genus in peatlands, and can differentiate into hummock species and hollow species, both of which often face the threat of drought. However, how they response to drought and interspecific interaction in morphological traits is rarely known. Under simulated wet and dry conditions, we established an experiment by setting different communities with Sphagna, two hummock species Sphagnum palustre and S. capillifolium and one hollow species S. fallax, to analyze the effects of drought and interspecific interaction on biomass production, height increment, sideshoot production and leaf hyaline cell volume percentage (HCP) of Sphagna. The results showed that drought caused decreases in biomass production, height increment and sideshoot production in all three species, and increased HCP of S. palustre and S. capillifolium. In addition, neighborhood significantly inhibited biomass production and sideshoot production of S. palustre, and reduced HCP of S. capillifolium. Interaction between drought and neighborhood was found in HCP in all the three species. Our study suggests that the three Sphagnum species can adapt to drought and interspecific interaction through morphological adjustment, and the capacity of droughttolerance of hummock species should attribute to the increase of waterholding ability by increasing HCP.