Permafrost stability is significantly influenced by the thermal buffering effects of snow and active-layer peat soils. In the warm season, peat soils act as a barrier to downward heat transfer mainly due to their low thermal conductivity. In the cold season, the snowpack serves as a thermal insulator, retarding the release of heat from the soil to the atmosphere. Currently, many global land models overestimate permafrost soil temperature and active layer thickness (ALT), partially due to inaccurate representations of soil organic matter (SOM) density profiles and snow thermal insulation. In this study, we evaluated the impacts of SOM and snow schemes on ALT simulations at pan-Arctic permafrost sites using the Energy Exascale Earth System Model (E3SM) land model (ELM). We conducted simulations at the Circumpolar Active Layer Monitoring (CALM) sites across the pan-Arctic domain. We improved ELM-simulated site-level ALT using a knowledge-based hierarchical optimization procedure and examined the effects of precipitation-phase partitioning methods (PPMs), snow compaction schemes, and snow thermal conductivity schemes on simulated snow depth, soil temperature, ALT, and CO2 fluxes. Results showed that the optimized ELM significantly improved agreement with observed ALT (e.g. RMSE decreased from 0.83 m to 0.15 m). Our sensitivity analysis revealed that snow-related schemes significantly impact simulated snow thermal insulation levels, soil temperature, and ALT. For example, one of the commonly used snow thermal conductivity schemes (quadratic Sturm or SturmQua) generally produced warmer soil temperatures and larger ALT compared to the other two tested schemes. The SturmQua scheme also amplified the model’s sensitivity to PPMs and predicted deeper ALTs than the other two snow schemes under both current and future climates. The study highlights the importance of accurately representing snow-related processes and peat soils in land models to enhance permafrost dynamics simulations.