Wetlands of the Great Lakes region are increasingly dominated by invasive cattails (Typha angustifolia and Typha X glauca) which form dense stands of live and dead biomass that may reduce plant diversity. We hypothesized that differences in plant litter accumulation explain cattail dominance under certain hydrologic regimes related to wetland hydrogeologic setting. We investigated cattail abundance, litter accumulation, and species density in three bayside wetlands hydrologically connected and three protected wetlands hydrologically isolated from Lake Ontario. Mean litter biomass was higher in bayside wetlands (1.7–2.6 vs. 0.4–1.2 kg/m²) and negatively related to species density (p  =  0.004) in both settings. A litter addition experiment demonstrated that fallen litter negatively influenced seedling survival (p  =  0.061) and species density (p  =  0.024). Decomposition rates accounted only partially for higher overall litter accumulation in bayside wetlands. Growing season water levels in bayside wetlands tracked Lake Ontario levels and showed less variation than protected wetlands. More stable water levels and higher density of standing dead stems in bayside wetlands may limit litter fragmentation, resulting in greater litter accumulation. Thus, anthropogenic and natural factors affecting cattail litter production, fragmentation, and decomposition could influence species diversity in coastal wetlands.