Peatlands cover only ~3 % of Earth’s land surface yet store ~30 % of global soil carbon (C), making them critical components of the terrestrial C cycle and influential regulators of C-climate feedbacks. However, their responses to climate warming and elevated CO₂ remain highly uncertain, in part because Earth system models represent peatland processes with varying levels of complexity and realism, and because peat C pools turn over on centennial to millennial timescales that challenge model evaluation. Here, we present results from the SPRUCE (Spruce and Peatland Responses Under Changing Environments) Model Intercomparison Project (SPRUCE-MIP), which evaluates 15 terrestrial ecosystem models against observations from a long-term whole-ecosystem warming and CO₂-enrichment experiment at an ombrotrophic bog in northern Minnesota, USA. Models were driven by observed meteorology from in situ warming treatments spanning +0 to +9 °C, at either ambient or elevated CO₂ (+500 ppm). Simulated net ecosystem exchange (NEE), net primary productivity (NPP), heterotrophic respiration (HR), and methane (CH₄) fluxes were benchmarked against multi-year observations. Model predictions exhibit a large spread in both baseline C balance, ranging from strong sinks to strong sources under +0 °C warming, and temperature sensitivity, indicating substantial uncertainty in predicting peatland C responses to environmental forcing. Across the ensemble, models fall into four distinct functional response types: (i) models that simulate peatlands as net C sources across all warming and CO₂ conditions; (ii) models that transition from C sinks to sources under warming irrespective of CO₂ level; (iii) models that transition only under ambient CO₂ but remain C sinks under elevated CO₂, reflecting strong CO₂ fertilization effects; and (iv) models that maintain persistent sinks or near-neutral C balance even under extreme warming. While most models predict enhanced NPP under elevated CO₂ across all warming treatments, SPRUCE observations show little or no NPP enhancement under elevated CO₂ at the +0 and +2.25 °C warming levels, with a positive CO₂ fertilization effect emerging only under stronger warming. This discrepancy highlights persistent model biases in representing interactions between warming and CO₂ responses. Process-based analysis further indicates that divergence in modeled responses is associated with differences in vegetation structure (light competition and moss representation), nutrient cycling (nitrogen and phosphorus), and dynamic peat representation. These structural differences systematically influence ecosystem productivity, heterotrophic respiration, and net C balance across the model ensemble. An illustrative parameter sensitivity analysis using the SPRUCE-specific Energy Exascale Earth System Model (E3SM) Land Model (ELM-SPRUCE)<span> </span>further shows that parameter choices can also modulate the magnitude of simulated responses. Together, these results demonstrate that peatland responses to warming and elevated CO<sub>2</sub> are highly sensitive to model structure, parameterization, and process coupling, highlighting the need for improved representation of key peatland processes to reduce uncertainty in Earth system projections<span>. </span>The SPRUCE experimental framework provides a unique benchmark for evaluation and improving process representation and constraining near-term peatland response to environmental change, thereby strengthening confidence in longer-term C-climate projections.