Veteran hollow trees are keystone structures in ecosystems and provide important habitat for a diverse set of organisms, many of which are involved in the process of decomposition. Since veteran trees are 'islands' of high biodiversity, they provide a unique system in which to study the relationship between biodiversity and decomposition of wood. We tested this relationship with a balanced experiential design, where we quantified the taxonomic and functional diversity of beetles directly involved in the process of decomposing wood, and measured the decomposition of experimentally added bundles of small diameter wood around 20 veteran trees and 20 nearby young trees in southern Norway. We found that the diversity (both taxonomic and functional) of wood-decomposing beetles was significantly higher around the veteran trees, and beetle communities around veteran trees consisted of species with a greater preference for larger diameter wood. We extracted few beetles from the experimentally added wood bundles, regardless of the tree type that they were placed near, but decomposition rates were significantly lower around veteran trees. We speculate that slower decomposition rates around veteran trees could have been a result of a greater diversity of competing fungi, which has been found to decrease decay rates. Veteran trees provide an ecological legacy within anthropogenic landscapes, enhance biodiversity and influence wood decomposition. Actions to protect veteran trees are urgently needed in order to save these valuable organisms and their associated biodiversity.