Common reed (Phragmites australis) is an invasive grass that is altering wetlands in the Great Lakes region. To determine the effect of Phragmites invasion on wetland carbon (C) dynamics, we investigated environmental conditions, plant litter decomposition, and release of gaseous C from sediment pools in Phragmites-dominated and pre-invaded Typha stands in a coastal freshwater marsh. Reciprocal litter bag transplant experiments revealed greater annual mass loss of both species’ litter at Phragmites-dominated sites (p < 0.05), but no difference in intra-stand decomposition between species. Incubation experiments revealed no difference in sediment CO2 release between Phragmites and Typha under oxic or anoxic conditions. Under anoxic conditions CH4 release was significantly greater from Typha sediments (p < 0.05). Leaching rates of DOC from plant litter were >50 % lower from Phragmites litter, and responses (CO2 release) of Phragmites sediments to leachate additions were greater than those of Typha sediments, indicating differences in sediment microbial communities. Our results suggest that Phragmites invasion may increase litter decomposition and reduce CH4 emission through environmental changes that alter microbial activity and/or composition, but the net effect of these changes on wetland C accumulation will depend on net primary production.