The expansion of shrubs across the Arctic tundra may fundamentally modify land‐atmosphere interactions. However, it remains unclear how shrub expansion pattern is linked with key environmental drivers, such as climate change and fire disturbance. Here we used 40+ years of high‐resolution (~1.0 m) aerial and satellite imagery to estimate shrub‐cover change in 114 study sites across four burned and unburned upland (ice‐poor) and lowland (ice‐rich) tundra ecosystems in northern Alaska. Validated with data from four additional upland and lowland tundra fires, our results reveal that summer precipitation was the most important climatic driver (r = 0.67, p < 0.001), responsible for 30.8% of shrub expansion in the upland tundra between 1971 and 2016. Shrub expansion in the uplands was largely enhanced by wildfire (p < 0.001) and it exhibited positive correlation with fire severity (r = 0.83, p < 0.001). Three decades after fire disturbance, the upland shrub cover increased by 1077.2 ± 83.6 m2 ha‐1, ~7 times the amount identified in adjacent unburned upland tundra (155.1 ± 55.4 m2 ha‐1). In contrast, shrub cover markedly decreased in lowland tundra after fire disturbance, which triggered thermokarst‐associated water impounding and resulted in 52.4% loss of shrub cover over three decades. No correlation was found between lowland shrub cover with fire severity (r = 0.01). Mean summer air temperature (MSAT) was the principal factor driving lowland shrub‐cover dynamics between 1951 and 2007. Warmer MSAT facilitated shrub expansion in unburned lowlands (r = 0.78, p < 0.001), but accelerated shrub‐cover losses in burned lowlands (r = – 0.82, p < 0.001). These results highlight divergent pathways of shrub‐cover responses to fire disturbance and climate change, depending on near‐surface permafrost and drainage conditions. Our study offers new insights into the land‐atmosphere interactions as climate warming and burning intensify in high latitudes.