Water is crucial for plant productivity and survival as a fundamental resource, but water conditions can also cause physiological stress and mechanical disturbance to vegetation. However, these different influences of water on vegetation patterns have not been evaluated simultaneously. Here, we demonstrate the importance of three water aspects (spatial and temporal variation of soil moisture and fluvial disturbance) for three ecologically and evolutionary distinct taxonomical groups (vascular plants, mosses and lichens) in Fennoscandian mountain tundra. Fine‐scale plant occurrence data for 271 species were collected from 378 × 1 m2 plots sampled over broad environmental gradients (water, temperature, radiation, soil pH, cryogenic processes and the dominant allelopathic plant species). While controlling all other key environmental variables, water in its different aspects proved to be a crucial environmental driver, acting on individual species and on community characteristics. The inclusion of the water variables significantly improved our models. In this high‐latitude system, the importance of spatial variability of water exceeds the importance of temperature for the fine‐scale distribution of species from the three taxonomical groups. We found differing responses to the three water variables between and within the taxonomical groups. Water as a resource was the most important water‐related variable in species distribution models across all taxonomical groups. Both water resource and disturbance were strongly related to vascular plant species richness, whereas for moss species richness, water resources had the highest influence. For lichen species richness, water disturbance was the most influential water‐related variable. These findings demonstrate that water variables are not only independent properties of tundra hydrology, but also that water is truly a multifaceted driver of vegetation patterns at high‐latitudes.