AbstractNorthern peatlands play an important role in the global C cycle due to their large C stocks and high potential methane (CH4) emissions. The CH4 and CO2 cycles of these systems are closely linked to hydrology, with water table level regulating the balance of oxic and anoxic conditions and the water content of Sphagnum mosses that dominate primary production. Previous work has demonstrated that hyperspectral indices well‐suited to the detection of altered hydrology in Sphagnum peatlands are also highly correlated with GPP. However, little work has been done to extend these findings to CH4 effluxes. In this study, we evaluate the utility of four hyperspectral indices, two reflecting vegetation photosynthetic function (chlorophyll index (CI); normalized difference vegetation index) and two reflecting water content (wetness index (WI); floating water band index), for detecting effects of altered water table, precipitation, and vegetation community on CH4 and CO2 exchange in two peatland mesocosm studies. We found that CI is a good predictor of net CO2 exchange, and that it captured both drought and vegetation effects consistently across a broad range of vegetation treatments. Further, we demonstrate for the first time that WI combined with CI explained a significant percentage of CH4 efflux (R2 = 0.32–0.57). Our results indicate that CI and WI together may be effective tools for detecting effects of altered hydrology and vegetation on northern Sphagnum‐peatland CH4 and CO2 emissions, with implications for detecting and modeling changes in emissions of greenhouse gases at scales ranging from the ecosystem to the Earth system.