Repercussions of species loss on ecosystem processes depend on the effects of the lost species as well as the compensatory responses of the remaining species in the community. We experimentally removed two co-dominant plant species and added a 15N tracer in alpine tundra to compare how species' functional differences influence community structure and N cycling. For both of the species, production compensated for the biomass removed by the second year. However, the responses of the remaining species depended on which species was removed. These differences in compensation influenced how species loss impacted ecosystem processes. After the removal of one of the co-dominant species, Acomastylis rossii, there were few changes in the relative abundance of the remaining species, and differences in functioning could be predicted based on effects associated with the removed species. In contrast, the removal of the other co-dominant, Deschampsia caespitosa, was associated with subsequent changes in community structure (species relative abundances and diversity) and impacts on ecosystem properties (microbial biomass N, dissolved organic N, and N uptake of subordinate species). Variation in compensation may contribute to the resulting effects on ecosystem functioning, with the potential to buffer or accelerate the effects of species loss.