AbstractDifferent peatland mosses have varying strategies for water storage and capillary rise mechanisms depending on their particular hydrophysical properties and preferred water sources. To understand these strategies, the retention and redistribution of water from various sources in Sphagnum, feather and Tomenthypnum moss communities were addressed through investigation of the sensitivity of moss moisture dynamics to environmental variables, field surveys and a drought stress experiment. Feather mosses preferred habitats well above the water table, and their relatively low volumetric water content (θ) increased only with precipitation events. The relatively high residual θ (0·22) of Sphagnum capitula helped the moss type maintain conditions suitable for photosynthesis over a range of water table conditions. Tomenthypnum mosses occurred over a broader range of water table positions than Sphagnum or feather mosses because of their ability to use both capillary rise and atmospheric water for growth. While Tomenthypnum had relatively low near‐surface θ (~0·10), evaporative losses were sustained by both small nocturnal additions by condensation of vapour and upward capillary rise. An intermediate layer of partially decomposed mosses supported contact with the underlying peat and helped transport sufficient water to the Tomenthypnum moss surface. However, Tomenthypnum θ and productivity changes were more sensitive to rainfall additions as the uppermost portion of moss shoots can easily desiccate under typical evaporative demand. As a result, nocturnal sources of atmospheric water from dew (~0·15 mm per night) and distillation (~0·10 mm per night) provided temporary relief from desiccation for potentially important early morning photosynthesis and helped drive evaporation and capillary rise. Copyright © 2015 John Wiley & Sons, Ltd.