Temperatures in the Arctic are expected to increase dramatically over the next century, and transform high latitude watersheds. However, little is known about how microbial communities and their underlying metabolic processes will be affected by these environmental changes in freshwater sedimentary systems. To address this knowledge gap, we analyzed sediments from Lake Hazen, NU Canada. Here, we exploit the spatial heterogeneity created by varying runoff regimes across the watershed of this uniquely large high-latitude lake to test how a transition from low to high runoff, used as one proxy for climate change, affects the community structure and functional potential of dominant microbes. Based on metagenomic analyses of lake sediments along these spatial gradients, we show that increasing runoff leads to a decrease in taxonomic and functional diversity of sediment microbes. Our findings are likely to apply to other, smaller, glacierized watersheds typical of polar or high latitude ecosystems; we can predict that such changes will have far reaching consequences on these ecosystems by affecting nutrient biogeochemical cycling, the direction and magnitude of which are yet to be determined.