Sphagnum species, as the peatland ecosystem engineer, play a key role in both succession of plant communities and development of ecological functions in Sphagnum wetlands. In order to explore the distribution characteristics and its influencing factors of the key species -Sphagnum palustre L. population in Sphagnum wetland of Dajiu Lake, Shennongjia, we carried out the field investigation and sampling for both vegetation and environmental factors in August 2020, by setting belt transects and quadrats along the outward direction perpendicular to lakeshore. A total of 33 quadrats including 11 types of plant communities were investigated and the corresponding soil and pore water samples were collected, then a series of physical and chemical indicators and physiological indicators were determined and analyzed in the laboratory. Combined curvilinear regression analysis, multiple linear regression analysis with Pearson correlation analysis, our results showed that: (1) with the increasing vertical distance away from lakeshore, each of the three growth indicators (number of capitula, coverage, and biomass) of S. palustre showed the increased trend at first and then decreased, with the largest productivity of S. palustre population occurred at about 40 m away from the lakeshore vertically. (2) The multiple linear regression analysis showed that among the twenty environmental factors, water table depth was the most important one affecting growth and distribution characteristics of S. palustre population, followed by the soil ratio of total organic carbon content to total phosphorus content (TOC/TP). Among the eight physiological indicators [the tissue total carbon content (TC), the tissue total nitrogen content (TN), the tissue total phosphorus content (TP), the tissue ratio of total carbon content to total nitrogen content (TC/TN), the tissue ratio of total carbon content to total phosphorus content (TC/TP), the tissue ratio of total nitrogen content to total phosphorus content (TN/TP), total chlorophyll content, and carotenoids content], only tissue TC significantly affected S. palustre growth and thus its population distribution characteristics. (3) Water table depth affected photosynthesis and respiration of S. palustre capitula, and soil total organic carbon content (TOC) affected C absorption and C assimilation in S. palustre tissue, which further affected its population growth and distribution characteristics. (4) In addition to abiotic factors, the biotic factors such as the interspecific interaction of vascular plants also played the important roles in the growth and distribution characteristics of S. palustre population. Compared with Veratrum nigrum, which had dense lamina at its basal section of stem and thus larger shading coefficient, the sedge plant Eriophorum comosum, at coverage of 60%, was more favorable for S. palustre. This study provides scientific guidance for Sphagnum wetlands protection and restoration in the subtropical mountain regions.