Tundra vegetation productivity and composition are responding rapidly to climatic changes in the Arctic. These changes can, in turn, mitigate or amplify permafrost thaw. In this Review, we synthesize remotely sensed and field-observed vegetation change across the tundra biome, and outline how these shifts could influence permafrost thaw. Permafrost ice content appears to be an important control on local vegetation changes; woody vegetation generally increases in ice-poor uplands, whereas replacement of woody vegetation by (aquatic) graminoids following abrupt permafrost thaw is more frequent in ice-rich Arctic lowlands. These locally observed vegetation changes contribute to regional satellite-observed greening trends, although the interpretation of greening and browning is complicated. Increases in vegetation cover and height generally mitigate permafrost thaw in summer, yet, increase annual soil temperatures through snow-related winter soil warming effects. Strong vegetation–soil feedbacks currently alleviate the consequences of thaw-related disturbances. However, if the increasing scale and frequency of disturbances in a warming Arctic exceeds the capacity for vegetation and permafrost recovery, changes to Arctic ecosystems could be irreversible. To better disentangle vegetation–soil–permafrost interactions, ecological field studies remain crucial, but require better integration with geophysical assessments.