Abstract Salinity is a well‐known environmental factor that profoundly influences vegetation growth and ecological functions of coastal salt marshes. This study conducted an in‐situ control experiment to assess the effects of salinity on the morphological and physiological traits of coastal Phragmites australis , as well as its carbon sequestration capacity (including CO 2 uptake, CH 4 emissions, and vegetation and soil organic carbon densities). Field investigations and microbial abundance analyses were integrated to provide a comprehensive assessment. The results showed that the growth characteristics and photosynthetic activity of P. australis increased initially but declined as salinity rose, peaking at a moderate level (5‰). Despite concurrent peaks in CO 2 uptake and CH 4 emissions at 5‰ salinity, the net negative daytime CO 2 ‐eq flux indicated that this salinity level provided the strongest net cooling effect, driven by stronger CO 2 uptake relative to CH 4 ‐induced warming. Under higher salinity levels (> 10‰), P. australis exhibited an adaptive strategy of reduced carbon allocation to roots, leading to a significant decrease in soil organic carbon density. Through the identification of salinity thresholds that optimize growth and carbon sequestration of P. australis , this study delivers a mechanistic understanding for advancing adaptive management and restoration efforts of coastal salt marsh ecosystems to enhance their blue carbon sequestration, particularly in the context of sea‐level rise.