The decomposition of plant material is an important ecosystem process influencing both carbon cycling and soil nutrient availability. Quantifying how plant diversity affects decomposition is thus crucial for predicting the effect of the global decline in plant diversity on ecosystem functioning. Plant diversity could affect the decomposition process both directly through the diversity of the litter, and/or indirectly through the diversity of the host plant community and its affect on the decomposition environment. Using a biodiversity experiment with trees in which both functional and taxonomic diversity were explicitly manipulated independently, we tested the effects of the functional diversity and identity of the living trees separately and in combination with the functional diversity and identity of the decomposing litter on rates of litter decomposition and soil respiration. Plant traits, predominantly leaf chemical and physical traits, were correlated with both litter decomposition and soil respiration rates. Surface litter decomposition, quantified by mass loss in litterbags, was best explained by abundance-weighted mean trait values of tree species from which the litter was assembled (functional identity). In contrast, soil respiration, which includes decomposition of dissolved organic carbon and root respiration, was best explained by the variance in trait values of the host trees (functional diversity). This research provides insight into the effect of loss of tree diversity in forests on soil processes. Such understanding is essential to predicting changes in the global carbon budget brought on by biodiversity loss.