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Abstract Decomposition has historically been considered a function of climate and substrate but new research highlights the significant role of specific micro‐organisms and their interactions. In particular, wood decay is better predicted by variation in fungal communities than in climate. Multiple links exist: interspecific competition slows decomposition in more diverse fungal communities, whereas trait variation between different communities also affects process rates. Here, we paired field and laboratory experiments using a dispersal gradient at a forest‐shrubland ecotone to examine how fungi affect wood decomposition across scales. We observed that while fungal communities closer to forests were capable of faster decomposition, wood containing diverse fungal communities decomposed more slowly, independent of location. Dispersal‐driven stochasticity in small‐scale community assembly was nested within large‐scale turnover in the regional species pool, decoupling the two patterns. We thus find multiple distinct links between microbes and ecosystem function that manifest across different spatial scales.