Abstract Deciduous shrubs form the tallest type of vegetation in arctic-alpine areas and are important for ecosystem function. In the southern part of the Eurasian tundra zone, willows (Salix spp.) are the most common species in the shrub layer. In the alpine areas of Northern Fennoscandia, willow shrubs are characteristic to areas between tree line and treeless tundra heaths. Vertical structure and composition of willow-characterized tundra vegetation is affected by a variety of ecological factors including climate and herbivory. In turn, the abundance of the willow canopy affects understory species in several ways that still remain inadequately understood. In this PhD work I describe compositional differentiation of willow-characterized vegetation by using a large data set spanning from north-western Fennoscandia to the Yamal Peninsula in north-western Siberia. I studied environmental factors affecting willow-characterized vegetation and willow growth by using correlative analyses. The factors under investigation were latitude, distance from the sea, depth of thaw, position in the slope, industrial disturbance and reindeer grazing. In addition, I examined the relationships between the shrub biomass estimate and composition and species richness of understory vegetation. The effects of reindeer grazing on vegetation in an alpine forest-tundra ecotone were studied experimentally using reindeer-proof exclosures. I found that willow-characterized vegetation is floristically variable and comprises at least eight vegetation types. The most abundant willow thickets typically have a forb-rich understory. The growth of willow increased along with increasing summer temperatures. However the height of willow was more determined by distance from the sea, thaw depth and slope position. Reindeer grazing decreased the abundance of willow and changed the composition of understory vegetation. In addition, industrial activities were detected to have destructed shrub vegetation and turned it into graminoid-dominated vegetation. Shrub canopies facilitated forbs but decreased the cover of all the other groups including dwarf shrubs, bryophytes and lichens. The species richness of vegetation decreased along with increasing shrub abundance. My study shows that arctic-alpine willow vegetation is more diverse than previously thought. There is a predictable relationship between summer temperatures and willow growth. However, the results also show that there are many factors, both physical and anthropogenic, that are likely to complicate this pattern. Most important of these counteracting effects are industrial activities and reindeer grazing. In the areas where shrubs grow in abundance, the species richness of understory vegetation is likely to decrease and forbs are likely to replace other tundra species.