Arctic ecosystems are characterized by a broad range of plant functional types that are highly heterogeneous at small (~1-2 m) spatial scales. Climatic changes can impact vegetation distribution directly, and also indirectly via impacts on disturbance regimes. Consequent changes in vegetation structure and function have implications for surface energy dynamics that may alter permafrost thermal dynamics, and are therefore of interest in the context of permafrost related climate feedbacks. In this study we examine small-scale heterogeneity in soil thermal properties and ecosystem carbon and water fluxes associated with varying understory vegetation in open-canopy larch forests in northeastern Siberia. We found that lichen mats comprise 16% of understory vegetation cover on average in open canopy larch forests, and lichen abundance was inversely related to canopy cover. Relative to adjacent areas dominated by shrubs and moss, lichen mats had 2-3 times deeper permafrost thaw depths and surface soils warmer by 1-2°C in summer and less than 1°C in autumn. Despite deeper thaw depths, ecosystem respiration did not differ across vegetation types, indicating that autotrophic respiration likely dominates areas with shrubs and moss. Summertime net ecosystem exchange of CO2 was negative (i.e. net uptake) in areas with high shrub cover, while positive (i.e. net loss) in lichen mats and areas with less shrub cover. Our results highlight relationships between vegetation and soil thermal dynamics in permafrost ecosystems, and underscore the necessity of considering both vegetation and permafrost dynamics in shaping carbon cycling in permafrost ecosystems.