Land use and climate change are driving widespread modifications to the biodiverse and functionally unique headwaters of rivers. In temperate and boreal regions, many headwaters drain peatlands where land management and climate change can cause significant soil erosion and peat deposition in rivers. However, effects of peat deposition in river ecosystems remain poorly understood. We provide two lines of evidence – derived from sediment deposition gradients in experimental mesocosms (0 to 7.5 g m-2) and headwaters (0.82 to 9.67 g m-2) – for the adverse impact of peat deposition on invertebrate community biodiversity. We found a consistent negative effect of sediment deposition across both the experiment and survey; at the community level, decreases in density (1956 to 56 individuals/m2 in headwaters; mean 823±129 (s.e.) to 288±115 individuals/m2 in mesocosms) and richness (mean 12±1 to 6±2 taxa in mesocosms) were observed. Sedimentation increased beta diversity among experimental replicates and headwaters, reflecting increasing stochasticity among tolerant groups in sedimented habitats. With increasing sedimentation, the density of the most common species, Leuctra inermis, declined from 290±60 to 70±30 individuals/m-2 on average in mesocosms, and >800 individuals/m-2 to 0 in the field survey. Traits analysis of mesocosm assemblages suggested biodiversity loss was driven by decreasing abundance of invertebrates with trait combinations sensitive to sedimentation (longer life cycles, active aquatic dispersal of larvae, fixed aquatic eggs, shredding feeding habit). Functional diversity metrics reinforced the idea of more stochastic community assembly under higher sedimentation rates. Whilst mesocosm assemblages showed some compositional differences to surveyed headwaters, ecological responses were consistent across these spatial scales. Our results suggest short-term, small-scale stressor experiments can inform understanding of ‘real-world’ peatland river ecosystems. As climate change and land-use change are expected to enhance peatland erosion, significant alterations to invertebrate biodiversity can be expected where these eroded soils are deposited in rivers.