Palaeoenvironments and former climates are typically inferred from pollen and macrofossil records. This approach is time-consuming and suffers from low taxonomic resolution and biased taxon sampling. Here, we test an alternative DNA-based approach utilizing the P6 loop in the chloroplast trnL (UAA) intron; a short (13-158 bp) and variable region with highly conserved flanking sequences. For taxonomic reference, a whole trnL intron sequence database was constructed from recently collected material of 842 species, representing all widespread and/or ecologically important taxa of the species-poor arctic flora. The P6 loop alone allowed identification of all families, most genera (>75%) and one-third of the species, thus providing much higher taxonomic resolution than pollen records. The suitability of the P6 loop for analysis of samples containing degraded ancient DNA from a mixture of species is demonstrated by high-throughput parallel pyrosequencing of permafrost-preserved DNA and reconstruction of two plant communities from the last glacial period. Our approach opens new possibilities for DNA-based assessment of ancient as well as modern biodiversity of many groups of organisms using environmental samples.