Abstract Intensive peatland drainage alters the physico-chemical status of the recipient streams, potentially leading to the loss of biodiversity and impaired ecosystem functioning. However, the extent of these changes, and particularly their impacts on downstream ecosystems, remain poorly understood. We studied the downstream effects of peatland drainage on stream biodiversity (aquatic bryophytes and macroinvertebrates) and key ecosystem processes (primary productivity, organic matter (OM) decomposition and OM standing stock). Our survey design comprised upstream (directly below drainage network) and downstream (∼300 m downstream) locations in 18 boreal headwater streams encompassing an extensive gradient of peatland drainage intensity (0–48 %). Drainage modified environmental conditions, with nutrient (TP, TN) and dissolved organic carbon (DOC) concentrations and inorganic sediment cover increasing with intensifying drainage, in both upstream and downstream sites. Species richness of both benthic macroinvertebrates and bryophytes was strongly reduced with increasing drainage intensity. Upstream and downstream sites responded in a similar manner, suggesting wide-ranging impacts of drainage on stream biodiversity. Regardless of site location, ecosystem processes were unrelated to drainage intensity. Our results confirm that intense peatland drainage not only modifies environmental conditions and biodiversity in adjoining streams, but these impacts propagate further downstream in the stream network. To prevent further degradation of drainage-impacted freshwater ecosystems, large-scale peatland restoration is needed, with prioritization of sites with the greatest potential (least drainage-induced damage) for biodiversity recovery.