The canopy habitat is fundamentally different from the forest floor with respect to floristic diversity, microclimate, and soil composition. As a result, we predicted that the fundamental ecosystem process of decomposition would also be different between the two habitats. In this study, we investigated the process of decomposition within the canopy habitat and on the forest floor in a tropical lowland rainforest in Costa Rica. We used host tree litter of three tree species (Dipteryx panamensis, Lecythis ampla and Hyeronima alchorneoides) in a one year litterbag study. We found that there were inherent species level differences in decomposition rates among the three tree species within canopy and forest floor habitats. On the forest floor, Lecythis ampla had greatest mass loss while within the canopy habitat Dipteryx panamensis had the greatest mass loss. The rate of nitrogen and phosphorous loss among the species within the different habitats was similar. The forest floor habitat had a significantly higher decomposition rate than the canopy habitat--the turnover time was more than twice that of the canopy habitat (6 months vs. 15 months respectively). The initial mass remaining in the canopy habitat after one year was 44% compared to 13% on the forest floor. Initial nitrogen, carbon and phosphorous remaining were all significantly higher in the canopy habitat (53%, 41% and 27% respectively) compared to the forest floor (18%, 12%, and 7% respectively). The differences in decomposition rates between the canopy and forest floor are likely a combination of factors, including microclimate and the decomposer community which are known to be significantly different between habitats. This study highlights the differences in the nutrient dynamics of these habitats which likely contribute to the differences seen in their floral composition.