Lignin is a main component of plant litter. Its degradation is thought to be critical for litter decomposition rates and the build-up of soil organic matter. We studied the relationships between lignin degradation and the production of dissolved organic carbon (DOC) and of CO2 during litter decomposition. Needle or leaf litter of five species (Norway spruce, Scots pine, mountain ash, European beech, sycamore maple) and of different decomposition stage (freshly fallen and up to 27 months of field exposure) was incubated in the laboratory for two years. Lignin degradation was followed with the CuO method. Strong lignin degradation occurred during the first 200 incubation days, as revealed by decreasing yields of lignin-derived phenols. Thereafter lignin degradation leveled off. This pattern was similar for fresh and decomposed litter, and it stands in contrast to the common view of limited lignin degradation in fresh litter. Dissolved organic carbon and CO2 also peaked in the first period of the incubation but were not interrelated. In the later phase of incubation, CO2 production was positively correlated with DOC amounts, suggesting that bioavailable, soluble compounds became a limiting factor for CO2 production. Lignin degradation occurred only when CO2 production was high, and not limited by bioavailable carbon. Thus carbon availability was the most important control on lignin degradation. In turn, lignin degradation could not explain differences in DOC and CO2 production over the study period. Our results challenge the traditional view regarding the fate and role of lignin during litter decomposition. Lignin degradation is controlled by the availability of easily decomposable carbon sources. Consequently, it occurs particularly in the initial phase of litter decomposition and is hampered at later stages if easily decomposable resources decline.