Ecotypic differentiation reduces climatic niche breadth at the population level relative to a species’ spatial distribution. For species that form climatic ecotypes, if future climate exceeds local population tolerance, climate change will precipitate the decline of extant populations range-wide. Here, we examine the variation in physiological and morphological traits of Eriophorum vaginatum L. collected from a 30-year-old reciprocal transplant experiment, in which six populations of E. vaginatum were transplanted along a latitudinal gradient from Eagle Creek to Prudhoe Bay, Alaska. We tested for ecotypic differentiation of photosynthesis, respiration, chlorophyll fluorescence, and biomass per tiller, which is a metric correlated with population growth in E. vaginatum. The light-saturated photosynthetic rate (Amax) showed homesite advantage in that tussocks in their homesites had significantly higher values of Amax relative to nonlocal populations. This pattern of homesite advantage was also observed for biomass per tiller, but not for fluorescence and respiration. Photosynthetic rate was positively correlated with biomass per tiller and survival, suggesting that adaptations related to photosynthesis may optimize performance of local populations to homesite conditions. Taken together, these findings indicate that a rapidly changing climate may elicit population decline of E. vaginatum, rendering this species at a competitive disadvantage to shrubs and boreal forest species, which are expanding northward as the climate changes. Transition from tussock-sedge tundra to boreal forest and shrubland alters features, such as albedo, soil temperature, and water-table depth, in ways that may accelerate climate change.