Macrofossil and chronostratigraphic data of a peat monolith extracted from a palsa within a subarctic permafrost peatland were used to reconstruct changes in vegetation and trophic conditions of the study site during the last 4500 cal y BP. The vegetation cover developed from Carex marsh or wet meadow to poor fen, bog, and to palsa peatland communities. The ombrotrophication was favoured by late-Holocene cooling and by the high peat accumulation. Permafrost inception began about 1660–1630 calibrated y BP, at the end of the Sphagnum accumulation stage. A comparison of the late-Holocene development of two peatlands in the same region (Arlen-Pouliot & Bhiry, 2005, and this study) suggests that permafrost initiation was due to a cool, dry climate associated with the Little Ice Age. However, Sphagnum cover prevented the permafrost from melting.